There hasn’t been a lot to write home about for property investors when the federal budget rolls around each year, and this year has been no exception. But the budget has focused on trying to help alleviate cost of living pressures for average Aussies, and certain measures will have a flow on effect for landlords.

Borrowing power boost

The headline measure for the budget was stage 3 tax cuts. From 1 July 2024, all taxpayers will receive a tax cut, which will obviously mean extra money to spend. For investors, this could mean a new property purchase. Depending on your earnings, you could find yourself better off by thousands of dollars a year. This will translate into greater borrowing power.

The tax cuts will mean a dual income couple on average wages would be able to borrow an extra $40,000 to buy property. This could prove the difference between being approved for a loan and rejected in certain property markets.

Overlapping areas

A number of budget policies will overlap with housing, as they free up more money for investing and also seek to get inflation under control, which could lead to rate cuts. A 10% increase in maximum rent assistance payments is one of these, as it will make it easier for tenants to pay their rent. Meanwhile, an extra $1 billion will go to states and territories through the Housing Support Program to build infrastructure that will help facilitate new housing developments. This expands on the $500 million previously committed.

Finally, more than 10 million households will receive $300 in power bill subsidies, while small businesses will receive $325 rebates. These will reduce inflation on energy, which is a metric that has been sticky so far.

Tax compliance

Something to keep an eye on is the money the government is investing in tax compliance in a bid to recover some of the money being lost in tax revenue, due to the crafty ways that ‘savvy’ Australians are reducing the tax they pay.

This will include funding for a compliance taskforce and new technology to help identify and block tax fraud. Already, AI has seen compliance monitoring capability come along in leaps and bounds and we should only expect it to advance further each year.

State of affairs

While the federal budget can affect all Australians, most of us are affected more at a local level by what state and territory governments choose as policies in their own budgets. While investors haven’t been impacted significantly by the federal budget, one need only look at the recently released NSW budget to see how different the story can be at the state level.

Property investors were deemed ‘losers’ as the NSW budget was handed down, because it was decided the land tax threshold would no longer increase with inflation, but would rather be frozen at $1.075m. This will see owners of investment properties, holiday homes and commercial properties pay $1.5 billion more in land taxes and will affect an extra 35,000 homeowners. This move will allow the state government to benefit from bracket creep, as it has done with stamp duty over the years.

It also brings NSW into line with what other states have in place, meaning some of the federal budget tax offsets may be swallowed up quite quickly. If you need help figuring out what your strategy looks like or you need more information, reach out to the Investor Relations team at B.Invested.