Property Investment & Construction Schemes

Property investment in Australia is supported by government schemes such as HomeBuilder and First Home Loan Deposit.

While the HomeBuilder scheme was not extended, ‘budget papers’ have stated 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 First Home Loan Deposit scheme (FHLDS) was also extended during the budget announcement to capture an additional 10,000 first home buyers.

This scheme was introduced at the beginning of this year and initially allowed 10,000 first home buyers to purchase a property with a small deposit.

As these loans we’re backed by the government, no Lenders Mortgage Insurance was required cutting holding costs when the property had been transacted.

This scheme was largely popular and more than half of the allocations were filled within the first six weeks of the calendar year.

Now, as this scheme (FHLDS) is extended to an additional 10,000 investors, entry costs are significantly lower for new home buyers. The price cap for the first homes was also increased during the Budget Night and is shown in the table below:

State / Territory Capital City / Regional Centre Rest of State
NSW $950,000 $600,000
VIC $850,000 $550,000
QLD $650,000 $500,000
WA $550,000 $400,000
SA $550,000 $400,000
TAS $550,000 $400,000
ACT $600,000 N/A
NT $550,000 N/A

Furthermore, the Budget has 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 the Treasurer 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 1 July 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 of time.

Taxpayers

‘Tax cuts’ initially scheduled to start in July 2022, have been brought forward for this financial year 2020 – 2021.

The tax cuts will automatically be applied and backdated from 1 July 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 $1,080.
  • Individuals earning over $90,000 will benefit greater by receiving an extra $2,565.

What does this mean for property investors?

This means by taking advantage of tax deductions on your investment property such as claiming tax depreciation, this means even more money is kept in your pocket rather than being paid toward tax, depending on your income.

Key Takeaways

There are a multitude of ways to take advantage of the tax cuts proposed in the Federal Budget for property investors.

Whether it’s the HomeBuilder scheme for first home buyers, commercial property investors or just general home buyers, tax depreciation is one of the fastest and best ways to claim bigger tax benefits with the new Federal Budget incentives.

If you’ve purchased a residential or commercial property, or you’re a commercial tenant with a new fit-out, you can request a free estimate from our team to find out how much more we can now help you save on tax. Give us a call on 1300 185 498 to find out how we can help you.

Sources:

Disclaimer: Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek a second professional opinion for any legal or tax issues raised in your investing affairs.
Portrait of Tuan Duong

Tuan Duong is an award winning Quantity Surveyor and leads Duo Tax Quantity Surveyors – Australia’s fastest growing provider of Tax Depreciation. Reach out to him directly on 0431 154 356 or email tuan@duotax.com.au

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