PROPERTY

What the Federal Budget means for property investors

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In one of the most significant Federal Budgets in recent memory, the government has introduced some important changes designed to support the property market and maintain a robust investing climate.

But for the average investor, what does it all mean? What opportunities are out there? And how can you make the most of them?

We'll cover it all so that you can make the best decision.

what the federal budget means for property investors

Property investment and construction schemes

Property investment in Australia is supported by government schemes such as the HomeBuilder scheme.

While the HomeBuilder scheme was not extended, Budget papers show that housing demand has increased as it's supported by other housing policies and a low-interest environment.

The HomeBuilder scheme allows cash grants for investors to renovate or build new homes and is subject to income, assessed as an individual or couple.

The Budget also fast-tracked infrastructure projects and state developments, allowing the provision of more motorways and railways, council roads and footpaths and street lighting. This is a beneficial outlook for investors purchasing in the captured areas as more amenities become available.

Businesses

Businesses have benefited from government support with schemes such as the instant asset write-off.

This write-off allows businesses to claim the full value of assets under a certain threshold as a tax deduction. The eligibility criteria and timeframe have now been extended until June 2022, and Treasurer Josh Frydenberg has commented that 99% of businesses will be able to access this incentive.

The threshold is $150,000 per asset, and the business must have a turnover up to $5 billion to be able to write off both new and second-hand assets. This may allow businesses to invest their cash flow further and allow for more opportunities in employment.

For small to medium enterprises, a cut in tax rates will be effective from July 1, 2022, and sees the rate of 27.5% to 25%.

What does this mean for commercial property investors and tenants?

The ability to write-off larger asset purchases immediately means that businesses can make significant and immediate savings in the year that the asset was bought, installed and first used rather than depreciating it across a longer period.

Income tax cuts

Tax cuts, initially scheduled to start in July 2022, have been brought forward to this financial year.

The tax cuts will automatically be applied and backdated from July 1, 2020, meaning the taxpayer will have a reduced tax liability moving forward. The taxpayers can expect to receive extra amounts due to the tax reduction and are subject to earnings described below:

  • Individuals earning between $45,000 and $90,000 will receive an extra $1080.
  • Individuals earning over $90,000 will benefit greater by receiving an extra $2565.

This means by taking advantage of tax deductions on your investment property such as claiming tax depreciation, you can keep more money in your pocket rather than being paid toward tax (depending on your income levels).

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Tuan Duong is the founder of Duo Tax Quantity Surveyors. He is an affiliate member of the Australian Institute of Quantity Surveyors and is a registered tax agent.
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