The changes affecting property buyers, owners and investors from July 1

Starting July 1, the property market will see a boost as tax cuts increase typical buyers' borrowing capacities by tens of thousands of dollars. This change, resulting from stage three tax cuts, will raise take-home pay and subsequently the maximum amount buyers can borrow. The increased budgets are expected to support price growth, despite high-interest rates. Additionally, first-home buyers will benefit from extended support schemes, while property investors will face closer scrutiny on tax returns. All households will also receive energy bill relief from July 1.


1. Tax cuts set to boost borrowing capacities

In the new financial year, tax rates are being adjusted to reduce the amount of tax paid by all income earners. Lower income brackets will see reduced tax rates, while the threshold for higher tax rates will increase. This means individuals will need to earn more before being taxed at higher rates.

How tax rates will change from July 12023-24 2024-25 
Income thresholdTax ratesIncome thresholdTax rates
$18,200 or lessTax free$18,200 or lessTax free
$18,201 – $45,00019%$18,201 – $45,00016%
$45,001 – $120,00032.50%$45,001 – $135,00030%
$120,001 – $180,00037%$135,001 – $190,00037%
Over $180,00045%Over $190,00045%
Source: treasury.gov.au

An individual earning the average full-time annual salary of $98,098 would save $2131 per year, according to the federal government’s tax cut calculator available online. Someone earning $50,000 per year would save $929, while a high income earner on $200,000 per year would save $4529. Most taxpayers will start seeing their tax cuts reflected in payslips from July 1. 

With the new tax cuts, everyone will enjoy more money in their accounts each week. Homebuyers, in particular, will benefit from increased borrowing power due to higher after-tax incomes. Since income greatly influences borrowing capacity, a higher income allows for larger loan repayments. For example, a buyer earning $100,000 may see their borrowing capacity increase by about $25,000, while someone earning $150,000 could borrow around $37,000 more.

This is based on specific conditions, including a 6.19% interest rate, 80% loan-to-value ratio, and a 30-year loan term. Additionally, households with two adults can benefit even more, as shared expenses like bills and utilities don't double. However, borrowing capacities have decreased by about 30% since interest rates began rising in May 2022.


Tax cuts are expected to increase borrowing capacities, giving a boost to the affordable end of the market typically targeted by first-home buyers.Picture: Getty

Tax cuts are expected to increase borrowing capacities, particularly benefiting the affordable end of the market where first-home buyers are most active. While cautioning against borrowing the absolute maximum, Mr. Algar noted that the tax cuts would have a meaningful impact, helping many borrowers, especially first-time buyers. Paul Ryan, a senior economist at PropTrack, echoed this sentiment, stating that the tax cuts would slightly boost the lower end of the market, where borrowing limits often constrain first-home buyers.

2. Crackdown on dodgy tax deductions

The Australian Tax Office (ATO) has cautioned property investors against making improper claims on their tax returns, which they estimate could be costing the government $1.2 billion annually. Incorrectly claimed interest deductions account for 42% of this figure. While investors can claim interest on loans used to purchase rental properties, the ATO notes that some try to deduct interest on funds used for personal expenses, such as cars, school fees, or holidays, after redrawing or refinancing their investment loans.

"If you have an $800,000 mortgage for a rental property and then add $50,000 to upgrade your family car, you can only claim the interest on the original $800,000, not the entire $850,000," explained ATO assistant commissioner Rob Thomson. Common errors include misclassifying repair and maintenance costs or "double-dipping" on claims through property management invoices. Additionally, large expenses must be spread over time unless they cost $300 or less. Recent data shows a 36% increase in investor lending, highlighting the need for careful tax compliance.



3. First-home guarantee extension 

The First Home Guarantee, 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, although the number of places is yet to be determined and will be announced on July 1. 

Under the scheme, up to 15% of the value of the property is guaranteed by Housing Australia, enabling buyers to purchase with a smaller deposit without paying lenders mortgage insurance. 35,000 places were available in the 2023-24 financial year.

To be eligible, first-home buyers need to meet certain criteria, including earning $125,000 or less for individuals or $200,000 or less for joint applicants and having a deposit between 5% and 20% saved. Property price caps vary between cities and regions, and buyers need to apply through a participating lender. 

4. Energy bill rebates begin 

Every household will receive a $300 energy rebate, automatically applied on electricity bills in quarterly instalments across the 2024-25 financial year. Businesses get a $325 rebate. 

Electricity prices jumped about 20% in the 2023-24 financial year, but the Australian Energy Regulator now expects electricity prices to fall from July for most residential electricity customers, regardless of the rebate. Wholesale electricity costs have fallen by up to 21%, but increased running costs for the electricity network mean prices will only fall by between 1% and 6% for most customers, the AER chair Clare Savage said. 

“The combined effect of these various changes in costs have resulted in prices decreasing in New South Wales and South Australia, and increasing in South East Queensland,” she said. 

5. New Victorian property tax kicks in

Stamp duty will gradually be abolished for commercial and industrial properties in Victoria, such as retail, offices and warehouses, starting in the new financial year.

Commercial and industrial properties that are sold after July 1 will enter the commercial and industrial property tax (CIPT) system.

Stamp duty will still apply for this transaction, although eligible purchases have the option of accessing a government loan to coverthe stamp duty payment.

An annual tax of 1% of the property’s land value will begin to apply to the property 10 years after the transaction.

When the property is sold again in the future, it will be exempt from stamp duty.

Change of use duty also applies if a commercial or industrial property that has entered into the scheme is later converted to residential, such as a warehouse being redeveloped into apartments.

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