2024/25 Federal Budget: What it means for first home buyers

In the 2024/25 Budget released on the 14th of May 2024, the Albanese Government has announced a raft of measures for the housing sector. However, first home buyers are a group that have been left out to a certain extent. Whilst the Treasurer Jim Chalmers announced that the Government will be focusing on boosting the construction of new homes across Australia, which will help create more supply, it doesn’t help first home buyers looking to buy their first home in the short term. 

We take a look at what the Federal Government has announced and how it will impact first home buyers below:

Negative Gearing & Capital Gains Tax

Unfortunately, the Government has announced no changes to the current measures aiding property investors, which in turn will impact first home buyers as they will still be competing with investors when bidding for properties, as they will still have access to the same negative gearing benefits and capital gains tax discounts.

The Government could have looked at reducing the benefits for property investors, which would have made it a more level playing field when it comes to bidding for properties. The Labor Government could also have looked at capping rent increases which makes it easier for aspiring first home buyers saving for a deposit. However, in some good news for first home buyers they have announced a 10% increase in the rate of rent assistance that will be available to almost one million households that are currently renting, this comes on the back of an increase of 15% in 2023.

‘Help to Buy’ Scheme (Shared Equity Scheme)

The Albanese Government has committed up to $5.5bn towards its proposed Shared Equity Scheme, which is yet to be passed in Parliament, as it still requires the support of either the Greens or Coalition parties.

This scheme allows first home buyers on low – middle income to purchase their first home with an equity contribution of 40% for new homes and 30% for established homes. The income thresholds currently sit at $90,000 for singles and $120,000 for couples – however, these figures will be adjusted in line with wage increases. This will allow first home buyers to have a mortgage that is either 60% or 70% of the property purchase price (depending on the type of property purchased). However, there is uncertainty around the scheme as it currently states that those taking advantage of the scheme must remain below the income thresholds for the duration of the scheme. For more information on this scheme, please click here.

‘Homes for Australia’ plan (Housing Australia Future Fund)

This is probably the most significant announcement; however, it is considered to be a long-term strategy aimed at assisting first home buyers over the coming years. The Government has announced that it is aiming to build 1.2 million homes over the next 5 years, i.e. 20,000 a month. They plan will be:

  • Providing $1bn to states and territories to build the infrastructure (new roads, sewers & connections) required to build more homes
  • Providing $1.9bn to community housing providers to help build 40,000 social and affordable homes
  • Training more construction to build homes to keep up with the demand for construction workers by offering 20,000 fee free Tafe places in the housing industry

FHBA welcomes this announcement, as it will have an impact for future first home buyers looking to buy in the medium to long term, as more supply of housing will result in the property market not rising as fast as it has done over the past decade.

Tax Cuts

Every taxpayer will expect to see an increase in their net pay from 01 July 2025 by up to thousands of dollars. For example, those earning a wage of around $70,000 can expect a tax cut of $1,400 whilst those earning $150,000 can expect to see their tax cut by $3,700 per year.

This will have a flow on impact on a first home buyer’s borrowing capacity. As it could mean that you can borrow between $25,000 – $40,000 more than you could in this financial year. Whilst this increase may not seem substantial it could prove to be the difference between missing out on a home and actually buying it.

For those aspiring first home buyers looking to buy with their partner, they will benefit the most as it will impact both individual’s net pay.

In addition to the tax cuts, for those with a HECS/Help Debt, the Government has announced that the indexation rate on the student debt balances will be capped at the CPI or WPI rates, which means it won’t rise faster than wages. This will help some first home buyers close their HECS accounts faster, which will drastically improve their borrowing capacity for the first home loan. Talk to a FHBA Coach to discuss how the tax changes could impact you.

First Home Buyer Guarantee (FHBG) Scheme

Unfortunately, there was no announcement made in relation to the Home Guarantee Scheme (HGS/FHBG). Teachers, nurses and social workers account for more than 50% of those that have taken advantage of the low deposit scheme over the past few years.

No new places have been announced for the 2024/25 financial year. We expect the Government to provide an update prior to July 2024 as to whether the scheme will continue or if it will be replaced by the Help to Buy scheme.

This is a very important policy considering it has meant that more than 30% of first home buyers in the current financial year have bought through the scheme.

For updates and more information on the FHBG Scheme, please click here

Written By,

First Home Buyers Australia

If you are unsure, or would like more information on how the Budget impacts you or how it can assist you get into your first home sooner, please book a call with FHBA Coach by completing the form below:

First Home Buyers Australia
First Home Buyers Australia

Australia’s leading organisation specialising in assisting first home buyers achieve the great Australian dream of property ownership.