1. Personal Income Tax Cuts
One of the most important announcements that will affect most people is the introduction of new personal income tax rates. These new rates will provide over 11 million people with $17.8 billion worth of tax savings. It has also been announced that by 2024-2025, 95% of taxpayers will pay no more than 30% of their income in tax (providing stage 3 tax changes are passed through Parliament).
So what does that mean for you? Simply put, you’ll get to keep more of your hard earned money and have more capital to spend, save or invest. Have a look at the chart below and see how much tax you’ll be saving this year.
The reduction of personal taxes allows every employed Australian access to more capital in the upcoming years, thereby stimulating consumption which will contribute to boosting the economy.
From 7 October 2020 until 30 June 2022, businesses with turnover of up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed. This allows businesses to reduce the cost of purchasing and installing new assets by claiming full depreciation. This will help most businesses with cash flow, and encourage enterprises to purchase and invest more into the economy.
The government will also allow companies with turnover of under $5 billion to offset any losses up to 2021-2022 to be offset against profits made in or after 2018-2019.
These measures are expected to create 50,000 jobs by the end of 2021-2022 and boost GDP by $2.5 billion in 2020-2021, and $10 billion in 2021-2022.
3. Infrastructure Stimulus
In addition to tax cuts for individuals and enterprises, the government also aims to create 40,000 jobs by stimulating infrastructure projects over the next 4 years. Currently, $14 billion has been committed including $7.4 billion for transport infrastructure across the country.
The following chart outlines how the $7.4 billion has been allocated as part of the Government’s 10 year, $110 billion infrastructure pipeline.
||Funding for major infrastructure projects (AUD)
||Estimated job creation (number)
||Total federal government funding for infrastructure after the epidemic (AUD)
||$ 1.3 billion
||$ 625 million
||$ 785 million
||$ 1.7 billion
||$ 2.7 billion
||$ 5 billion
||$ 1.6 billion
4. Employment Support for young people
The 2021 Federal Budget has incorporated two new employment subsidy programs to promote the employment of young Australians: JobMaker Hiring Credit and the JobTrainer Fund. As JobSeeker and JobKeeper begin to wind back in the upcoming months, JobMaker and JobTrainer will seek to replace the existing initiatives. JobMaker is expected to support 450,000 young Australians, allowing businesses to be able to receive $100-$200 per week for hiring an eligible person aged 16-35. Alternatively, JobTrainer will provide school leavers and job seekers access to 340,700 access to free or low-cost training and learning opportunities.
With approximately 40% of job losses between March and August aged 24 or younger, the government has introduced these two initiatives to boost employment for young people. These measures will allow young people access to higher skills training, enhancing their competitiveness in the job market and help encourage enterprises to create more jobs for young people.
5. First Home Buyer Subsidies
The 2021 Federal Budget also addresses first home buyers. For first home buyers looking to purchase a new home under the First Home Loan Deposit Scheme, an additional 10,000 opportunities have been made available in 2020-2021 – however these additional places are only available to buyers of new property, not existing property.
According to the First Home Loan Deposit Scheme, eligible first home buyers will only need a 5% deposit on a property without the need to pay lenders mortgage insurance.
The price cap for the scheme varies by city, as well as existing versus new property.
Supporting first home buyers via the first home loan deposit scheme is expected to further support demand in the real-estate markets as well as stimulate economic activity through residential construction.
So, what impact does this have on the real estate market?