On Tuesday, 6 October 2020, the Morrison Government handed down the 2020-21 Budget during an historic pandemic.
The Budget predicts the largest deficit since WWII ($213.7bn) and offers a range of stimulus measures to offset the loss of economic activity, most notable for strata in the construction, property, infrastructure and the small and medium business sectors.
The Treasurer Josh Frydenberg said the Budget was focused on “creating jobs, rebuilding the economy and securing Australia’s future.”
This update is designed to serve as a concise summary of the Budget areas that will most affect strata.
Read on to find the most relevant pieces of the Budget to the strata sector by Budget area.
Construction and Property
The construction industry will benefit from the extension and expansion of the First Home Loan Deposit Scheme.
Combined with the introduction of the HomeBuilder Scheme, these two construction stimulus measures have made a significant difference to the levels of enquiry experienced especially for new home builds.
The scheme – which eliminates lenders mortgage insurance for first home buyers with a 5 per cent deposit – will be extended to include an extra 10,000 people and eligibility criteria will relax to include more expensive properties.
The new upper limit cap rate for property price to be eligible under scheme is:
Sydney - $950,000
Melbourne - $850,000
Brisbane - $650,000
WA, SA, NT, TAS - $550,000
Applicants must be first home buyers and have earned less than $125,000 for singles and $200,000 for couples.
For more information, visit here.
Strata Community Association (SCA) has advocated strongly to extend the HomeBuilder Scheme to the strata sector.
SCA has welcomed the scheme and has supported the position of the Master Builders Association and Property Council of Australia who have strongly advocated for an extension of the scheme and its expansion to include parallel funding for community buildings. SCA will continue to advocate on this issue.
Small and Medium Businesses
There are a raft of changes to benefit and stimulate businesses, which strata services and business can make benefit from. Some of the changes include the elimination of fringe benefits tax on items such as phones and laptops and deductions for start-up expenses.
Businesses will also be offered ‘temporary full expensing’, meaning they can write off certain purchases of assets such as vehicles immediately, rather than over the life of the asset.
For a more detailed summary, visit here.
Personal Tax Cuts
Although the tax cuts are not specific to the property or strata industry, they will offer all lot owners relief to be able to ensure levy contributions and maintenance are kept up to date. SCA has advocated on this issue to the federal government and continues to provide information relevant to the strata sector.
The tax cuts have been well publicised, but the Stage 2 tax cuts which have been brought forward from 2022 are worth $1215 per year for a person earning $90,000 per annum. If the Stage 3 cuts are implemented early, a person earning $90,000 per year will get a further $1125.
For a full run down of the tax cuts and to access a useful calculator, visit here.
Demand for Strata Complexes
Due to the restrictions on international travel and much of Australia’s population growth being driven by net overseas migration, overall population growth is predicted to slow. Many international arrivals, including international students, settle in Australian cities and live in strata titled complexes, meaning there could be a downward pressure on the demand for apartments and townhouses over the Budget forecast period. Analysts have identified population growth as a potential drag on economic growth of the Budget forecast period.
Looking Ahead
The Federal Government has handed down the Budget and the resulting $213.7bn deficit (the largest since WWII) based on the following assumptions:
Unemployment will peak at 8 per cent and fall to 6 per cent in 2022-23
A COVID-19 vaccine will be rolled out to Australians by the end of 2021
All state borders will be opened by Christmas 2020
International travel will remain low until the end of 2021
The Federal Government is forecasting economic growth of 4.25 per cent next calendar year.
Additional Information
For more information, the Treasurer’s media release page has individual announcements of each of the biggest measures in this year’s Budget. Visit here. The ABC’s Budget 2020 Cheat Sheet has a great run down of some of these measures, and some of the measures that have a less direct impact on the strata sector. Visit here. The Housing Industry Australia (HIA), Master Builders Australia and Property Council have also put our various forms of Budget analysis, available at their respective websites. Please contact Shaun Brockman, SCA National Policy Manager for further information at shaun.brockman@strata.community.