Deep dive into what the latest Federal Budget changes could mean for you

The Aussie economy has made an impressive bounce back from COVID, supported by high levels of government stimulus and low interest rates. The good news is that the best may be yet to come.

Let’s take a look at how the latest Budget could impact you, your property plans and your small business.

The 2021/22 Federal Budget saw the Morrison Government launch a fresh round of stimulus. It will take net government debt to $617.5 billion this year, peaking at $980.6 billion in June 2025.1 

However, Federal Treasurer Josh Frydenberg,2 says, “This is low by international standards. As a share of the economy, net debt is around half of that in the UK and US, and less than a third of that in Japan.”

The economy bounces back

Even before the latest Federal Budget, the economy’s rapid recovery defied the naysayers. 

The unemployment rate fell to 5.5% between March and April 2021. That’s the sixth consecutive fall, down from 6.9% in October 2020, and 2.0% below its peak in July 2020, when unemployment was at 7.4%.

Interest rates are still at historic lows, and the Reserve Bank has reaffirmed that it doesn’t expect to raise rates for at least three more years.

The upshot is that Australia’s economy is expected to grow 4.25% in the current financial year.3 Not bad when you consider that this time a year ago the Treasurer4 feared unemployment could reach 15% and the economy could contract by more than 20%.

The question is, what does the latest Federal Budget hold for you? Let’s find out.

Personal tax relief

Who doesn’t love tax savings? The Budget has extended the Low and Middle-Income Tax Offset (LMITO), worth up to $1,080 annually (or $2,160 for couples), for an additional 12 months to cover the 2021/22 financial year. 

If your taxable income is between $37,001 and $126,000, you will get some or all of the low and middle income tax offset.5 This is in addition to the low income tax offset.

If you’re eligible for the LMITO, it’ll hit your pocket after you lodge your tax return for the 2021/22 financial year.

Lots of benefits for first home buyers

First home buyers have come up trumps as big winners in the 2021/22 Budget.

The Budget has seen an extension of the First Home Super Saver (FHSS) scheme to reduce pressure on housing affordability. 

The scheme allows first home buyers to save up to $50,000 in super (up from $30,000 previously) through tax-friendly voluntary contributions to purchase a home.

An extra 10,000 places will be added to the First Home Loan Deposit Scheme, so first home buyers can buy or build a new home with a deposit of just 5% and no need to pay lenders mortgage insurance (LMI).

Not every bank is on the panel for the FHLDS, so it’s essential to speak with your Mortgage Choice broker to know if you’re eligible – and to pinpoint which lenders have come on board to the Scheme.

Read more about the FHLDS here.


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Opportunities for single parents

Single parents who earn up to $125,000 annually will now have assisted access to established housing under the new Family Home Guarantee scheme. This initiative will see single parents able to purchase a home with just a 2% deposit and zero LMI.

The Family Home Guarantee will be open from 1 July 2021. However, places are limited to a total of 10,000 home buyers over four years. So it pays to get in quick.

The Family Home Guarantee is not available through all banks. Your Mortgage Choice broker can explain if you could be eligible and highlight the lenders taking part in the Scheme.

Downsizers have an incentive to sell up, bringing more homes to market

Australians aged 60-plus, who’ve lived in their current home for at least 10 years can now sell up and scale down to a more manageable home, and use some of the sale proceeds on sale to make a downsizer after-tax super contribution of $300,000 or $600,000 combined for a couple. Previously this benefit was only available from age 65.

Angus Raine, Executive Chairman, Raine & Horne, says, “This is not only a great way to turbocharge your retirement savings in a tax effective way. Empty nesters will be able to make a community contribution by freeing up their larger family homes for the next generation of upgraders.”

It can make now a good time for downsizers to sell. A study by shows COVID-19 has noticeably increased how much people are paying for large homes relative to smaller ones. Owners of three-bedroom or larger homes have been the biggest winners in the upswing in prices over the past year.

Child care savings – more money for families

The 2021/22 Budget brings an increase in the maximum Child Care Subsidy for families with more than one child. That’s great news for mums and dads. Not only does it make returning to work more affordable, the expanding subsidy reduces the cost of care, and that can be a big plus for families managing a home loan.

According to Treasury figures,7 from 1 July 2022 a family with three kids and combined household income of $80,000 annually, can save around $108 on weekly child care costs.

What about investors?

A more buoyant economy, a healthy job market and low interest rates are all good news for property investors. 

The latest Budget made no mention of any changes to negative gearing rules. But it did allocate spending of $15.2 billion over the next 10 years to a number of infrastructure projects, many of which focus on regional areas.

This is a plus for investors looking at affordable regional markets, which have dished up a valuable combo of rising values plus strong rental yields over the last year. 


Property investor guide

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Small business – lots to smile about  

As Josh Frydenberg says, “Small and family businesses are the engine room of our economy. They are at the heart of every local community.” And small businesses have certainly scored a plus from the Budget.

The latest Budget extends two valuable tax incentives announced last year – temporary full expensing and the temporary loss carry-back.

The temporary loss carry-back allows eligible companies to carry-back tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year.8

And if your business is in the market for new equipment including new vehicles, the extension of temporary full expensing means more than 99% of businesses can write off on tax the full value of any eligible asset they purchase until 30 June 2023.9 Your tax professional can explain if you’re eligible.

Speak to your Mortgage Choice broker for competitive commercial finance for asset purchases. It can help grow your business, while providing valuable tax savings today. 

The fine print

All the Budget initiatives need to pass through parliament, and many of the longer term initiatives may hinge on the Morrison Government being re-elected. 

That said, your Mortgage Choice broker is the go-to person, who can explain if the latest Budget could help you achieve your property or business goals.