Budget winners: First-time buyers and granny flat builders

For first home buyers

As previously reported by Smart Property Investment, more first home buyers are set to benefit from 5 per cent home loan deposits. 

The scheme was first implemented in response to a Morrison government election promise – but with more than half of the 10,000 allocated places for the 2020-21 financial year being snapped up in the first three months alone, it was clear the scheme is a popular one with first home buyers.

The First Home Loan Deposit Scheme (FHLDS) allows eligible applicants to purchase a home (within certain price restrictions based on location) with a deposit of just 5 per cent, without paying lender’s mortgage insurance.

The opening up of 10,000 new places in the scheme does have a tighter set of requirements than the initial scheme, being restricted to the building of a new home or purchase of a newly built home.

Mr Frydenberg said the additional guarantees will be available until 30 June 2021 “and will drive more construction and support jobs as part of our economic recovery plan”.

For affordable housing

The federal government has also indicated that it will be extending its guarantee for the National Housing Finance and Investment Corporation (NHFIC) by a further $1 billion in low-cost finance, which will go towards the construction of more affordable housing for those who need it – boosting jobs, construction and access to housing.

A further $150 million will be put towards the Indigenous Home Ownership Program, which will see the construction of new homes in regional areas and the creation of more jobs while helping “hundreds of indigenous families buy their own home”, Mr Frydenberg said.

For granny flat tax breaks

Although providing an “unquantifiable impact on receipts over the forward estimates period”, the budget has also outlined the provision of a targeted capital gains tax (CGT) exemption for granny flat arrangements – where there is a formal written agreement.

According to the Treasury, this exemption will apply to arrangements with older Australians or individuals with a disability, with the measure to take effect from the first income year after the date of Royal Assent of the enabling legislation.

The government outlined that CGT consequences are currently an impediment to the creation of formal and legally enforceable granny flat arrangements.

“When faced with a potentially significant CGT liability, families often opt for informal arrangements, which can lead to financial abuse and exploitation in the event that the family relationship breaks down.”

It is hoped the measure will reduce the risk of abuse to vulnerable Australians, and is consistent with recommendations from the Board of Taxation’s Review of Granny Flat Arrangements, the government’s National Plan to Respond to the Abuse of Older Australians, and the 2017 Australian Law Reform Commission’s Report: Elder Abuse – A National Legal Response.