Budget 2019: Who are the winners?

Budget 2019-20 is here…but there isn’t all that much for borrowers or the property market.

However, if you squint really hard, there are some surprising golden nuggets that first-time buyers and business owners may have overlooked.

No changes to negative gearing and CGT

No news is good news for property investors, with the Morrison Government announcing no changes to negative gearing and the capital gains tax (CGT).

Benefit: Property investors can continue to build their portfolios and take advantage of tax benefits.

However, shadow treasurer Chris Bowen has revealed that, if elected to government, a Labor-led government would limit negative gearing to newly-built properties and halve the capital gains tax discount to 25% for properties purchased from 1 January 2020.

Essentially, these changes would make it easier for first home buyers to buy an existing property while pricing them out of new properties. Rents would likely increase as well.

It’s hard to know what effect changes to negative gearing would have for the wider economy.

This is because several sectors such as the building industry will be affected and such impacts as rents increasing may not happen for a few years.

Tax cuts

More than $158 billion in tax relief has been announced in the Budget and it mostly favours low and middle income earners.

Here’s a breakdown of the non-refundable tax offset that will be available to Australians earning:

• $18,201-$37,000: $255.
• $37,001-$48,000: $255-$1,080.
• $48,001-$90,000: $1,080.
• $90,001-$126,000: $1,080 ($2,160 for dual income families).
• Over $126,000: No tax relief (that last budget offered a modest $135 tax cut).

These tax cuts amount to the “the largest personal income tax cuts since the Howard government”, according to Treasurer Josh Frydenberg.

Benefit: This tax relief is essentially keeping more money in your pocket, which you can use to better manage your financial commitments and build your savings to put towards a deposit for a house or pay down your mortgage.

In reply, shadow treasurer Bowen stated that Labor would match the Coalition’s tax cuts, plus an additional $1 billion in tax relief for low income earners.

Infrastructure funding boost

While Senator Frydenberg made no announcements that directly stimulate the property market, around $100 billion has been dedicated to achieve the Government’s 10-year infrastructure plan.

This is the largest, single investment in infrastructure in Australia’s history and includes:

• $3.5 billion for the first stage of the Western Sydney Rail North South Rail Link.
• $2 billion for fast rail from Geelong to Melbourne.
• $500 million for car parks at train stations.

Benefit: Continuing to improve infrastructure across Australia will make it more viable for first home buyers to purchase affordable properties outside of metro and inner city locations in part due to reduced travel time.

This is great news for investors because it will likely increase property prices in select markets over the medium-to-long term. If there’s government investment near you then you may want to consider buying a property in that area.

Boon for business owners

The Government has extended the instant asset write off for small businesses to 30 June 2020 and increased the threshold from $25,000 to $30,000.

This scheme is also no longer limited to a single purchase which means that small business owners can claim a tax write off each time they purchase an asset under $30,000.

This includes vehicles, factory or warehouse machinery, and other essential business equipment.

Benefit: This is great news for self-employed borrowers who want to grow their business.

Some lenders will allow you to add back these expenses which can greatly improve your borrowing power. After all it’s a capital investment to grow your business.

Essentially, these Budget proposals provide business owners with greater opportunity to buy the equipment they need to improve their operations without being penalised.

How can you improve your chances of home loan approval in 2019?

The implementation of these budget measures hinge on Scott Morrison beating Bill Shorten in the next Federal election, which is likely to be held in mid-May 2019.

Whether the Liberal government holds onto power is another question entirely.

To improve your chances of buying a property today:

• Save a deposit: You generally need a minimum of 5-10% of the property value as a deposit but there a no genuine savings options available such as a guarantor loan.
• Reduce your spending: Banks have been paying closer attention to your monthly living expenses than ever before so reducing your non-essential or discretionary living expenses can greatly improve your borrowing power.
• Make your payments on time: The introduction of positive credit reporting means your repayment history now has a major impact on your credit file and how banks assess your risk as a borrower.

Speak to a mortgage broker

An experienced broker can fully assess your situation and apply with a lender that takes a common sense approach to your situation.

Take advantage of the many opportunities in the Australian real estate market today – it’s not all doom and gloom!

Call us on 1300 889 743 or fill in our online enquiry form to discover if you qualify for a home loan in 2019.