New Rules, New Game: Property Market Shifts From July 1st — Are You Ready?

Major Changes Affecting Property Buyers, Owners, and Investors from July 1

 

Starting July 1, significant tax cuts and new government policies will impact property buyers, owners, and investors. These changes will increase borrowing capacities, extend support for buyers (especially first homes), crack down on incorrect tax deductions, provide energy bill rebates, and introduce a new property tax in Victoria.

…..

The property market is set to experience a significant shift starting July 1, with a series of tax cuts and government policies designed to benefit buyers, owners, and investors. These changes aim to boost borrowing capacities, extend support schemes, ensure fair tax deductions, and provide financial relief on energy bills. Here’s what you need to know:

 

1. Tax Cuts to Boost Borrowing Capacities

One of the most impactful changes is the adjustment to tax rates, which will reduce the amount of tax that all income earners pay. This reduction will vary based on income levels, with lower income brackets seeing tax rate reductions and higher income thresholds being adjusted.

For instance, an individual earning the average full-time annual salary of $98,098 will save $2131 per year. Someone earning $50,000 annually will save $929, while high-income earners making $200,000 will save $4529. These tax cuts will start reflecting in payslips from July 1, increasing take-home pay and, consequently, borrowing power.

 

Pros:

• Increased Borrowing Power: Higher after-tax income boosts the amount buyers can borrow, helping them afford more expensive properties.
• Economic Stimulus: More disposable income could lead to increased spending, benefiting the broader economy

Cons:

• Potential Overborrowing: Buyers might stretch their finances to the maximum, increasing their financial risk.
• Market Pressure: Increased borrowing capacity could lead to inflated property prices, making homes less affordable for some.

 

2. Crackdown on Dodgy Tax Deductions

The Australian Tax Office (ATO) will intensify its scrutiny of property investors’ tax returns, particularly targeting incorrect claims on interest deductions and repair costs. The ATO estimates that incorrect claims could be costing the government $1.2 billion annually.

Pros:

• Fair Tax System: Reducing incorrect claims ensures a fairer tax system.
• Government Revenue: Helps recover significant revenue lost to incorrect claims.

Cons:

• Increased Scrutiny: Investors need to be more diligent with their tax returns, potentially increasing administrative burdens.
• Financial Penalties: Errors, even unintentional, could lead to financial penalties for investors.

 

3. First-Home Guarantee Extension

The First Home Guarantee program, which allows eligible first-home buyers to purchase a home with a deposit as low as 5%, will continue in the 2024–25 financial year. This scheme is supported by Housing Australia, guaranteeing up to 15% of the property’s value.

Pros:

• Accessibility: Helps first-home buyers enter the market with a smaller deposit.
• Reduced Costs: Avoids the need for lenders mortgage insurance, saving money for buyers.

Cons:

• Limited Places: The number of places in the program is capped, potentially leaving some buyers without support.
• Eligibility Criteria: Strict eligibility criteria might exclude some potential buyers.

 

4. Energy Bill Rebates Begin

Starting July 1, households will receive a $300 energy rebate, automatically applied to electricity bills in quarterly instalments.

Businesses will receive a $325 rebate.

Pros:

• Cost Relief: Provides immediate financial relief on energy bills for households and businesses.
• Encourages Savings: Supports households in managing increased energy costs.

Cons:

• Limited Impact: The rebate might not significantly offset rising energy costs for some households.
• Administrative Costs: Implementing and managing the rebate system incurs administrative expenses.

 

5. New Victorian Property Tax

Victoria will gradually abolish stamp duty for commercial and industrial properties, replacing it with an annual property tax starting ten years after the transaction. This change aims to reduce upfront costs for property buyers.

Pros:

• Reduced Upfront Costs: Lower initial costs for commercial and industrial property buyers.
• Encourages Investment: Could stimulate investment in commercial and industrial properties.

Cons:

• Ongoing Tax Burden: The annual property tax could become a financial burden over time.
• Transition Challenges: Adjusting to the new tax system might pose challenges for property buyers and investors.

 

 

Conclusion

The upcoming changes from July 1 promise to bring significant shifts to the property market. While the tax cuts will enhance borrowing capacities and provide economic stimulus, the increased scrutiny on tax deductions and the new Victorian property tax could pose challenges for some. First-home buyers and households will benefit from continued support and energy rebates, respectively. These changes, while varied in their impact, collectively aim to support a more robust and fair property market.

 

Written by Allan John

Australian Real Estate Agent who loves to write & share his insights on economic narratives, helping savvy investors.