Albanese Government Budget 2023-24 Released: Key Measures Affecting Property Owners.
On Tuesday 9th May, the Albanese Government released its federal budget for the new financial year. The Government Budget, which builds on the Albanese Government’s first Budget released six months ago, largely focuses on supporting those vulnerable people with the rising cost of living and aims towards stronger foundations for a better future. This highlights key measures, including:
- Delivering cost-of-living relief: helping with power bills, reducing out-of-pocket health costs, supporting Australians most in need, more affordable housing, and keeping wages moving.
- Strengthening Medicare: historic investments in Medicare, improving access to primary care, and health protection and prevention.
Important housing measures of the Budget.
Released on the evening of the 9th May, the 2023-24 Budget focuses on helping Australians manage rising inflation. The Government has brought together states and territories, the Australian Local Government Association, investors and the construction sector through the National Housing Accord with a shared ambition to boost supply and build one million new homes from 2024. The Budget expands on this commitment by providing greater incentives for long-term rentals, more investment in social and affordable housing, and improved pathways to home ownership.
Within the Budget, the Treasurer announced a range of measures to assist with housing affordability, in a $14.6 billion cost-of-living plan, including the following.
1) Commonwealth Rent Assistance
To ease pressures on renters, the Budget is increasing the maximum rates of Commonwealth Rent Assistance by 15 per cent, the largest increase in over 30 years. This provides up to $31 extra a fortnight for people renting in the private market and community housing. This will assist around 1.1 million households, to help recipients better manage the cost-of-living pressures in the face of strong rent growth. Renters will also be further supported through the National Cabinet commissioned reforms to strengthen renters’ rights across the country. For our clients with investment properties this will assist by allowing them to increase rental income to cope with interest rate rises.
2) Home Guarantee Scheme
Announced earlier in the month, the Home Guarantee Scheme is expanding from the 1st of July. This will help more Australians into home ownership sooner, by expanding the eligibility criteria. This expansion will allow:
- Any 2 eligible borrowers to be joint applications for a guarantee beyond married and de facto couples,
- Non-first home buyers who have not owned a property in Australia in the preceding 10 years to access the First Home Guarantee and Regional Home Guarantee,
- A single legal guardian of children to access to the Family Home Guarantee, and
- Australian Permanent Residents, not just Australian citizens, to access the Home Guarantee Scheme.
3) National Housing Finance and Investment Corporation (NHFIC)
Soon to be renamed Housing Australia, the Government is providing an additional $2 billion to support the NHFIC, bringing the NHFIC’s liability cap to a total of $7.5 billion. This is to support more lending to community housing providers for social and affordable housing projects. Whilst an increase to supply of property may slow the growth of property as an investment vehicle, we believe that this injection of funds will not have a significant impact on growth potential in most good property markets. Give us a call if you would like more information regarding this statement
4) NHFIC’s Investment Mandate
In the Government’s aim to increase support for social and affordable housing across Australia, and improve access for home buyers, NHFIC’s Investment Mandate will be amended. This will require NHFIC to take reasonable steps to allocate a minimum of 1,200 homes to be delivered in each state and territory within 5 years of the Housing Australia Future Fund commencing operation.
5) Redirecting interest earnings on unallocated NHFIC funds
All interest earnings on unallocated NHFIC funds will be redirected to support more social and affordable housing and delivery of housing priorities.
6) Household Energy Upgrades Fund
By investing in energy improvements for households, the $1.3 billion Household Energy Upgrades Fund will create low-interest loans and fund upgrades to social housing to improve energy performance. The Household Energy Upgrades Fund will inject $1 billion into the Clean Energy Finance Corporation, ultimately unlocking more than 110,000 low-interest loans for energy-saving home upgrades, in partnership with private lenders. Additionally, $36.7 million is being invested to provide households with access to better information about where they can save energy and reduce their energy bills.
7) Nationwide House Energy Rating Scheme
This scheme is being expanding to existing homes, meaning that people can soon get a star rating of their home’s energy performance, helping Australians make the best decisions for their hip pockets when it comes to renting, purchasing or renovating their homes.
The Nationwide House Energy Rating scheme along side along side the built to rent break are welcome initiatives which will help to make the purchase of new homes and investment properties more sustainable due to the slightly higher tax breaks as an investment as well as attractiveness of these properties if they will be more cost effective to live in.
8) Contingency Reserve supporting upgrades to social housing
In the Government’s aim to support home upgrades that improve energy performance and energy savings, $300 million of these funds, over 4 years from 2023-24, will be held in the Contingency Reserve to support upgrades to social housing, which contribute to saving energy.
9) Built-to-rent tax break
Tax incentives are being offered to build-to-rent projects to increase the supply of housing. The Government is offering new incentives to encourage the supply of housing by,
- Reducing the withholding tax rate for eligible fund payments from managed investment trusts attributed to newly constructed build-to-rent developments from 30 to 15 per cent, and
- By increasing the capital works tax deduction (depreciation) rate from 2.5 per cent to 4 per cent per year, increasing the after tax returns for newly constructed build-to-rent developments.
In turn, this should unlock 150,000 rental properties over 10 years, increasing the supply of rentals in the Australian property market.
10) Defence housing feasibility review
Aimed at improving the housing burden of Australian Defence Force personnel, to encourage home ownership, and to ensure Defence housing meets future needs of the ADF, $2.0 million in 2023-24 will be provided to conduct a Defence housing feasibility review.
Maximising opportunities and overcoming challenges: Vision can help you navigate the Albanese Government Budget 2023-24
The recently released Budget, by the Albanese Government, for the new financial year, may present challenges, or significant opportunities for you. At Vision, we are here to help you navigate these measures and ensure that your specific needs are met. We want to discuss your goals with you and encourage you to reach out to us so we can extensively and thoroughly guide you throughout these changes.
If you’re an investor, the Budget’s increase in the maximum rates of the Commonwealth Rent Assistance may present valuable opportunities for your property portfolio. Likewise, with the Home Guarantee Scheme expanding its eligibility, first home buyers are provided with an increased chance to secure affordable housing, with greater security in a time of economic uncertainty.
No matter who you are and what stage of life you are in, let us be your reliable guide and expert adviser. Contact us today.