In early October, the Federal Government handed down the 2020-2021 Budget. Many of the measures announced as part of the Budget are focused on bolstering Australia’s economy in the wake of the COVID-19 pandemic.
Encouragingly, several of these measures are targeted at stimulating Australia’s residential construction market. We explore each of these in further detail below.
First Home Loan Deposit Scheme
As part of the 2020-2021 Budget, Treasurer Josh Frydenberg announced an extension of the First Home Loan Deposit Scheme, with a predicted stimulus of $800 million to the construction and building industry.
The scheme aims to generate an extra 10,000 first home buyers this financial year, targeting those constructing a new home. A price cap for new homes has been removed and the price thresholds increased for newly built homes.
Benefits For First Home Buyers
The Scheme offers several key benefits for first home buyers. The Scheme effectively guarantees up to 15% of the value of a new home.
This means that first home buyers can potentially buy their dream home with a deposit as little as 5%, without taking out lenders mortgage insurance (LMI). For buyers with a small deposit, this could save them thousands of dollars and see them enter the housing market much sooner.
How To Access The First Home Loan Deposit Scheme
To access the First Home Loan Deposit Scheme, you’ll need to meet several criteria, including:
- You must be a first home buyer
- You must be an Australian citizen
- If you are an individual, you must earn less than $125,000 per annum. For couples, you must earn less than $200,00 combined
- The property cannot be utilised as an investment
If you meet the criteria above, you’ll need to contact one of the 27 eligible lenders (including the four major banks and a range of other financial institutions) for further information.
Applying for the scheme shouldn’t affect your entitlements under other federal and state government home buyer schemes. For instance, depending on where you live you may also claim a first home buyer grant and stamp duty concessions or exemptions.
If you sign a building contract before the end of 2020, you may also qualify for the HomeBuilder scheme, which could provide $25,000 towards the cost of building your new home.
How Much Is The Threshold?
The exact amount of this threshold varies, depending on where in the country you’re planning to build. These thresholds will also be raised so that the scheme applies to more properties, especially in the country’s more expensive property markets such as Sydney and Melbourne. However, so far, new home sales have increased across Western Australia, South Australia and Queensland.
In fact, according to the HIA, the number of loans for the construction of a new dwelling increased by 27.1% in the month of September 2020. This is the single highest result since the Australian Bureau of Statistics commenced the collection of this type of data in 2002.
Further Tax Cuts To Put Towards House Deposits
The Budget also featured tax cuts, which apply to the 2020-2021 financial year.
The Federal Government’s tax cuts affect two tax brackets. The 19% tax rate will be lifted from $37,000 to $45,000 and the 32.5% rate will be lifted from $90,000 to $120,000. The tax-free threshold of $18,200 remains. How much you’re likely to save will obviously depend on exactly how much you earn.
The Federal Government has confirmed that it will refund any money taxpayers have already paid above the newly announced thresholds for this financial year.
These tax cuts could provide home builders with extra money, which could be put towards their deposit.
For further insight on building your new home enquire free with us today.