With a budget that could probably be described as the ‘Oprah Budget’ [because there is a prize for everyone], these are the bits that are going to be relevant to you in the real estate industry:
There are a range of continued housing incentives including:
- Retirees incentivised to contribute more to super [up to $300,000 per person] when they sell their family home
- Family Home Guarantee to support single parents with dependants to enter or re-enter the housing market [government guarantee of loans when they have a deposit as little as 2%]
- Extension of the construction commencement period within the HomeBuilder program from 6 months to 18 months [supporting the construction industry, the jobs within the industry and reflects the smoothing out needed by the construction activity]
- A further 1,000 places under the New Home Guarantee in 2021-22 specifically for first home buyers
- From 1 July 2022, the Government has increased the maximum amount of voluntary super contributions that can be released from super under the First Home Super Saver from $30,000 to $50,000 [saving within super to buy your home].
Increases in Super Guarantee Rate will go ahead from 1 July 2021
The amount of super an employer must pay for employees increases to 10% from 9.5%, from 1 July 2021. There was talk this may be deferred, but it appears to be going ahead.
This is important for the real estate industry and brings to light the importance of whether you have a commission or salary package plus or inclusive of super.
Extension of Low and Middle Income Tax Offset [LMITO]
The LMITO has been extended to 30 June 2022 [previously set to end on 30 June 2021]. This offset will provide a maximum offset of $1,080 for individuals earning between $48,001 and $90,000. For individuals with income of $90,001 to $126,000 the offset will phase out at 3 cents for every dollar over $90,000.
Company tax rate cuts still in place [already legislated]
Company tax rates are already scheduled to reduce to 25% for businesses with turnover less than $50m from 1 July 2021.
This is not new but the budget has confirmed no changes to this.
Removal of lower threshold for Super Guarantee [don’t get too excited]
Under the current rules if an employee earned less than $450/month an employer [very few in the real estate industry but maybe your Saturday receptionist] had no requirement to pay them any super on their wages. This minimum earning requirements is no longer applicable and as an employer, you need to pay super for everyone, irrespective of how low their income is.
The proposal is to abolish the cap from 1 July 2022.
Individual tax cuts [already legislated anyway]
Most personal tax cuts have already been legislated including some that were backdated to 1 July 2020 [when the government did their mini-budget in October 2020] and some that are yet to come into effect in 2024-25 when the big tax cuts really come into play.
The tax cuts for 2024-25 and onwards have already been legislated, but as a reminder, this is what they will be:
Taxable income Tax rate on this income
$18,200 to $45,000 19%
$45,001 to $200,000 30%
$200,001 and over 45%
plus Medicare levy of 2%
These tax rate changes in 2024-25 are significant in that the government estimates around 95% of taxpayers will pay a marginal tax rate of 30% or less. This is significant from a structuring perspective when you look at what the company tax rate will be at that point in time [25%].
Extension of temporary full expensing of asset purchases
Immediate tax deduction for the purchase of depreciable assets [including software] extended to 30 June 2023.
- Deduction has no dollar value limit
- Only applicable to businesses with turnover less than $5 billion
- Items need to be installed ready for use by 30 June 2023
- Includes improvements to existing eligible depreciable assets
- Includes the purchase of second-hand assets for businesses with turnover less than $50 million
It is important to emphasise that this initiative still only results in a tax deduction reducing the after-tax cost of an investment which is great for encouraging investment and for matching cashflow timing with the tax deduction.
However I am not very excited about this for real estate businesses given you generally do not require significant equipment to operate and if you do, you have probably already purchased them. This initiative it more targeted at manufacturing, argibusiness and similar types of businesses.
Extension of temporary loss carry-back provisions
This provision was introduced to allow anyone who makes a loss in the current year to offset it against profits in prior years dating back to the 2019-20 financial year.
I don’t think I know any real estate businesses making a loss in the 2020-21 financial year so this is mostly irrelevant.
It will now also apply though in 2022 and 2023 financial years should the market dramatically turn [can’t see this happening but we are in crazy times] to create a refund of tax paid in the earlier years.
JobMaker hiring credit [still here but used very little]
Employers can claim an amount per week for new employees hired as follows:
- 16-29 years of age = $200 per week
- 30-35 years of age = $100 per week
- Available from 7 October 2020 to 6 October 2021
- Employee must have previously been on JobSeeker, Youth Allowance or Parenting Payment for at least one of the previous 3 months at the time of hiring
- Need to increase the overall headcount of employees [cannot terminate older employees and replace with younger employees to attract the credit]
- New employees must work at least 20 hours per week
- Employers must be reporting payroll through Single Touch Payroll [STP]
Interestingly there were many other macro-economic initiatives announced in the budget including some very niche incentives and some very broad projects such as:
- JobTrainer + Apprenticeship Support
- Funding for domestic violence
- Increased funding for Childcare
- Aged care support
- Mental health support
- Big infrastructure spends
- Support for regions
- Digital transformation initiatives
- Some tax changes for breweries [maybe we need to start a brewery?]
- Some easing of ability for older Australians to put money into super
As always, none of this is legislation until it receives Royal Assent.