While the Australian economy has been faring well from the coronavirus compared with many other advanced economies, the budget 2021-22 aims to “secure Australia’s economic recovery” by investing in infrastructure and skills to create more jobs and provide incentives to business to “hire, innovate and grow”.
The budget lays out record commitments on essential services, disability support, mental health, aged care and women’s safety.
Federal Treasurer Josh Frydenberg presented a range of new initiatives for home ownership and small businesses in the 2021-22 budget.
As announced ahead of the full budget release, the government will introduce a new Family Home Guarantee that aims to give 10,000 single parents with dependants the opportunity to build a new home or purchase an existing home with a deposit of 2 per cent without having to pay lender’s mortgage insurance (LMI).
Starting on 1 July 2021, the new guarantee aims to support divorced or separated parents with dependent children by enabling them to purchase a home sooner with a deposit of as little as 2 per cent. The government will guarantee up to a maximum of 18 per cent of the property purchase price, allowing the applicant to get a loan without paying lender’s mortgage insurance.
Applicants must be Australian citizens, at least 18 years of age and have an annual taxable income of no more than $125,000.
“The Family Home Guarantee is based on the successful First Home Loan Deposit Scheme and New Home Guarantee which are helping more than 26,000 first home buyers to enter the housing market sooner,” the government said.
The FHLDS (New Homes) scheme (also known as the New Homes Guarantee) which was launched last year, will be expanded for a second year, providing an additional 10,000 places in 2021-22.
“Recognising the importance of the residential construction sector in driving jobs and economic growth, the government is providing a further 10,000 places under the New Home Guarantee in 2021-22, specifically for first home buyers seeking to build a new home or purchase a newly built home with a deposit of as little as 5 per cent,” the government said.
Improving women’s economic security
The government said it would be investing a total of $1.9 billion to “support women’s economic security”.
As well as noting that the Family Home Guarantee will support many single mothers (according to the government, more than three-quarters of single parents in Australia are women), the government noted that the $1.9 billion will include a $1.7 billion to improve the affordability of childcare.
“Childcare is an important driver of higher workforce participation and women’s economic security,” Mr Frydenberg said.
He added that the move will “increase the affordability of childcare for low‑ and middle‑income families”, saying that 250,000 families will be better off by an average of $2,200 each year.
“Giving more parents, especially women, the choice to take on extra work,” he said.
To help support women’s economic security, the government is also investing $10.7 million over two years to streamline the process and provide lawyers to assist with mediation to distribute property of less than $500,000 between parties and after separation following a relationship breakdown.
The proposal aims to “help women achieve financial security and control, recover financially from separation, and move on with their lives”.
The government has said it will also increase the maximum amount of voluntary contributions that can be released under the First Home Super Saver Scheme from $30,000 to $50,000, effective from 1 July 2022.
“This increase will fast-track home ownership for first home buyers. It recognises that deposits required for home purchases have increased over the years given house price growth,” the government said.
It will also enable those aged over 60 to contribute up to $300,000 ($600,000 per couple) into their superannuation if they downsize their home, “freeing up more housing stock for younger families”.
The one-off, post-tax contribution from the proceeds of selling their home will fall outside the usual contribution caps.
“This gives Australians more flexibility to contribute to their superannuation, especially women and those with moderate balances. Around 55 per cent of those who have used the downsizer contribution to date are women, and 73 per cent have balances less than $500,000,” the Women’s Budget Statement reads.
The government is also removing the work test at a cost of $33.7 million over the forward estimates. This will “further improve” the flexibility to make superannuation contributions.
“This measure will allow those aged 67 to 74 years to make or receive non-concessional and salary sacrificed contributions without meeting the work test, subject to existing contributions caps,” it continues.
Pension Loans Scheme changes
From 1 July 2022, the government will also introduce a No Negative Equity Guarantee for the Pension Loan Scheme and allow people access to a capped advance payment in the form of a lump sum.
It will mean that borrowers under the PLS, or their estate, will not owe more than the market value of their property, in the “rare circumstances” where their accrued PLS debt exceeds their property value. This brings the PLS in line with private sector reverse mortgages.
Eligible people will be able to receive a maximum lump sum advance payment equal to 50 per cent of the maximum Age Pension. A maximum of two advances totalling up to the cap amount are permitted in a year, for those who do not want to take an advance in one instalment
“We will also enhance the Pension Loan Scheme by providing immediate access to lump sums of around $12,000 for singles, and $18,000 for couples,” the Treasurer said.
Mr Frydenberg said in his speech: “We want all Australians to get the most out of the superannuation system.
“On average, women retire with less superannuation than men. So, tonight the government will remove the current $450 per month minimum income threshold for the superannuation guarantee. This will improve economic security in retirement for around 200,000 women.
“Our plan will also make it easier for Australians to prepare for retirement and to be more secure once in retirement,” he continued.
“We will improve flexibility by no longer requiring older Australians to meet a work test before they can make voluntary contributions to superannuation.
“Under the Coalition, Australian seniors will always have more control over their money,” the Treasurer said.
More money for CDR
The Morrison government is also investing almost $1.2 billion in Australia’s “digital future” through the Digital Economy Strategy, as part of this year’s federal budget.
Under the Digital Economy Strategy, the government will put forward $111.3 million investment to continue and expand the Consumer Data Right as a key foundation of a data-driven economy.
This will support the continued implementation in banking and energy sectors, as well as provide for the assessment and designation of a new sector every 12 months, commencing with telecommunications.
‘HomeBuilder to the rescue’
While releasing the budget, Mr Frydenberg said: “When construction work began to dry up, HomeBuilder came to the rescue.
“New house starts are now the highest in 20 years.
“New loans to first home buyers reached their highest level in nearly 12 years.
“HomeBuilder has been a huge success. And our $2 billion investment in affordable housing is bringing on more supply.”
He continued: “Mr Speaker, in this budget, our housing measures go even further.
“Helping another 10,000 first home buyers build a new home with a 5 per cent deposit.
“Supporting 10,000 single parents to purchase a home with a 2 per cent deposit.
“Increasing the amount that can be released under the First Home Super Saver Scheme from $30,000 to $50,000.
“Under the Coalition, home ownership will always be supported.”
More to come.
[Related: Lenders welcome new Family Home Guarantee]
If you’re feeling overworked and overwhelmed in this fast-paced mortgage market, it’s time to make some changes, and the Business Accelerator Program can help! Early bird tickets are on sale now. Work smarter, not harder, this year.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.