2019 Pre-Election Budget

2019 Pre-Election Budget Released

How will the proposed 2019 Budgets affect home owners and investors?

Last week, Scott Morrison and Bill Shorten released their proposed budgets following the national election on May 18 2019.

Many topics including infrastructure, employment and health services were addressed, which covered the news headlines. Housing affordability plans and assistance schemes were given mention by both major parties.

The Coalition – Scott Morrison’ housing affordability policy & ASIC’s new enforcement strategy

In short: The Coalition will dedicate $1.7Bn toward ‘housing affordability’ for low income workers and people on government pensions. $606.7M over 5 years dedicated toward responses to the Banking Royal Commission’s 76 recommendations.

Pros:

  • The Scott Morrison government promises a fund-raising mechanism dedicated toward building social and community housing for Australians on welfare pensions such as disability schemes.
  • ASIC’s new enforcement strategy and expansion of capabilities is granted the largest slice of the $606.7M for RC recommendations. This will enhance supervisory and enforcement activities respective of bank operations and remuneration. Treasurer Josh Frydenberg stated this would ‘strengthen the financial system and deliver better outcomes for all Australians’ [1].

Cons:

  • Little is mentioned for independent First Home Buyers. While the recent housing price fall has hindered investment purchases and opened up competitive space for First Home Buyers, the Coalition’s proposed 2019-2020 budget has not mentioned any government support in this advantageous buyer’s market.

Some states continue to offer First Home Buyers grants, so check out our Stamp Duty Calculator if you could be exempt from paying stamp duty and receive a First Home Owner Grant in your state.

Who are the winners under the Coalition Budget?

Under the Coalition’s proposed 2019 budget, the winners in the housing space will be Australians seeking community and social housing.

Pre-Election Budgets. Bill Shorten replies to Scott Morrison

Budget talks fire up prior to the 2019 Federal election on May 18

Labor Party – Bill Shorten’ change to negative gearing policy and capital gains tax

In short: ALP’s policy will be to reduce the capital gains tax discount by 50%. Negatively geared property losses will only be able to be written off against other investment income, as opposed to writing off against standard taxable wages and salary income.

Pros:

  • By Labor’s policy reducing the incentive to buy a negatively geared investment property, the bottom line will see less investment interest and more owner occupiers shifting into the housing mix. This includes First Home Buyers. Having said this, ALP gave no mention to financial assistance for First Home Buyers – similarly to the Liberals’ proposed budget [4].

Cons:

  • Currently the capital gains taxes 47c per dollar on investment properties owned less than a year, and offers a 50% discount on that tax for properties owned over a year. Labor’s proposed tax discount policy will decrease existing tax discounts by half [3]For example, the capital gains tax of an investment property sold for $500,000 go from $132,500 on current policy to $198,750 under the proposed policy.
  • Investors are hit with another blow when writing off losses from negatively geared properties against tax paid on wages. The proposed ALP policy will only allow losses to be written off against other investment income, as opposed to writing off against standard taxed wages.

Who are the winners under Labor’s proposed budget?

Ultimately under Labor’s proposed budget, investors who don’t negatively gear their rental properties will be the winners, along with future owner occupiers currently fighting against investors to buy a live-in property.

How will the 2019 proposed party budgets affect you?

How will the 2019 proposed budgets affect you as a home owner? Check your enrolment details are correct at https://www.aec.gov.au/.

 

[1] Frydenberg, ABC News https://www.youtube.com/watch?v=emBzmJPUuok 

[2]  Kane, The Advisor, https://www.theadviser.com.au/breaking-news/38971-budget-2019-20-released# 

[3] Chang, News.com.au https://www.news.com.au/finance/real-estate/buying/housing-explainer-labor-and-coalition-policies-on-negative-gearing-and-capital-gains-tax/news-story/206dd8af09ae4a29cb475adb76c00fbc

[4] Redman, Blayden, Domain https://www.domain.com.au/news/federal-budget-2019-little-for-housing-affordability-amid-property-slowdown-815208/

(29)    For the Rate Cutter Variable where the borrower pays $1170 upfront fees then a corresponding loyalty discount of 0.10% p.a. off the Rate Cutter Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(27)    For the Investor Rate Slasher Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Slasher Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(26)    For the Low Rider Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(25)    For the Economizer Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Economizer Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(24)    For the Super Saver Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.10% p.a. off the Super Saver Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(23)    For the Super Saver Variable where the borrower pays an upfront fee of $1170 then a corresponding loyalty discount of 0.15% p.a. off the Super Saver Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(22)    For the Economizer Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.11% p.a. off the Economizer Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(21)    For the Investor Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(18)    For the Home Owners Dream 1 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(20)    For the Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(14)   For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(12)   For the Investor Rate Lovers Interest Only where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.07% p.a. off the Investor Rate Lovers Interest Only rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(11)   For the Wealth Maximizer 3 year fixed Principal & Interest where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(10)    For the Wealth Maximizer 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(9)    For the Home Owners Dream 3 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(8)    For the Home Owners Dream 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(7)    For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(6)    For the Investor Rate Buster Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Investor Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(5)    For the Rate Buster Variable where the borrower pays an upfront fee of $150 then a corresponding loyalty discount of 0.05% p.a. off the Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(4)For the Rate Slasher Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.08% p.a. off the Rate Slasher Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(3) For the Investor Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Lovers Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(2)For the Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Rate Lovers Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(1) For the Low Rider Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(28) For the Rate Crusher 1 Year Fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.05% p.a. off the Rate Crusher reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(19) For the 1 Year Fixed Wealth Maximizer where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the 1 Year Fixed Wealth Maximizer reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.