17/04/2025
LABORS FIRST HOME GUARANTEE AND DUTTONS TAX-DEDUCTIBLE HOME LOAN
Last night's debate proved housing affordability will only get worse in coming years, no matter who wins the election. First-home buyers will be going nuts soon with the expanded First Home Guarantee Scheme and possibly pocketing $55,000 in tax deductions if Dutton scrapes it in.
Banks are comfortable lending 80% of a property's value, so they have a 20% buffer. The FHG Scheme provides a 15% guarantee from the government, so buyers have needed to only come up with 5%. Neither side of politics has bothered to negotiate with the banks to provide just a 5% guarantee, where the banks are always comfortable lending 90% without LMI, to a range of health professionals. They should, just to limit the potential liability.
But until now, the scheme had 5 harsh restrictions:
1. The scheme had a cap on the value of the property being purchased. But Labor has announced these caps will be increased to more realistic values, tabled.
Remember, this is very different to the property caps for the waiving of Stamp Duty, which is a State Government thing.
2. The 5% deposit needs to be what we call 'genuine savings', meaning it generally has to be sitting in their bank account for 3 months before applying. So, be prepared. There is no news yet if this will change.
3. Current income restrictions require a single person to earn less than $120,000 and couples less than $200,000. Interestingly, the way this is determined is what your taxable income was on your last Tax Assessment Notice.
We had an IT contractor last year who profited $300,000 from her Pty Ltd company, so she drew out $115,000 and left the $185,000 in the company as undistributed profit. This did the trick.
The $185,000 was taxed at the company tax rate, and then she'll pull out the rest over the next few years, progressively paying top-up-tax to her individual marginal tax rate. I reckon she should take a financial year off work and go to Bali, and pull out the wages in that year.
Labor has said the income restriction will be ditched. This is great news and what I have been saying for years. Could it be that the Ministers actually read my emails? They are on this list! G'day Albo.
It hasn't been fair up till now. Why has it been the case that the 40% of us who pay more tax than we receive in benefits miss out? Those who exceed these income levels can still find it difficult to raise a 10 or 20% deposit.
4. There has been a limited number of placements, but Labor is now making it unlimited.
5. The scheme is only allowed for those buying their first home, as opposed to an investment property.
You need to 'plan on living in the house'. Hmm, do you want to know how this is policed?
This will not change, although I wish it would. So many young people are getting their foot in the market by buying an investment property first. They may wish to stay at home for a bit or may even embrace rentvesting, a flexible and tax-effective way of getting ahead and living right where they want to!
I have a lot to say about this. Maybe watch my Tiktok video @ ichoicehomeloans
For those of you who have kids with a HECS debt, last week their Capacity just increased!
If there's only a year to go, we can completely ignore the HECS liability when calculating servicing! Otherwise, we can apply a 1% buffer rather than the usual 3%. What a game-changer. It should be an email just in itself! If your kids have a pre-approval, we can make it bigger.
First-home buyers who buy a newly built property and earn under $175K ($250K for couples) will, under Dutton, be able to claim the interest paid on the home loan as a tax-deduction, up to $650,000, for the first 5 years, costing taxpayers around $55,000. What the?
Addressing supply directly, the Coalition is offering $5 billion for infrastructure and a cut to migration of $100,000. Labor offers $10 billion in grants and loans to state government developers to subsidise the build of 100,000 homes in addition to the $10 billion Housing Australia Future Fund for social and affordable housing.
Addressing supply is the solution for the long term, which hasn't been done well for a long time.
If you're able to go guarantor for your kids, they have it the easiest. They'll be in a position to buy an investment property, which is easier for us to approve for them.
They can borrow 104% of the purchase price, yep, the full amount plus the Stamp Duty. Maybe any savings they have can be reserved for a renovation - or their next property purchase.
