When owning your own property, there are always demands on your wallet – from maintenance and cleaning costs to energy bills. On top of this, keeping a household budget balanced, especially for growing families or those on low incomes, can be a real worry.
Fortunately, there is some good news for homeowners when it comes to tax incentives. The Australian Tax Office or ATO also provide online information, calculators and tools to support when it comes to submitting your tax return. If you are looking to buy your own property or if you already own a home, you need to ensure that you are getting the best deal by reviewing your options with professional home loan brokers.
Since the lockdown process was introduced due to the global COVID-19 pandemic, employees have had to work from home. The Australian Government introduced a tax break which was extended to 30 June 2021. This was a temporary shortcut method which allowed you to deduct working from home costs such as energy costs, internet fees, stationery or office supplies, phone usage that otherwise would have been provided at your place of work. The claims were based on a fixed rate of 80 cents for each hour worked and while not extended past the June deadline, there have been calls for this to be extended.
If you are a landlord or if you sublet your property to earn rent, there are a number of property related costs that can be set against your taxation bill. From roof repairs to replacement windows, cost of insurance and rates paid to the council, these are some of the basics that could be claimed back but as always it is important to go through this with your tax accountant. If the cost of owning the property is more than the income you receive, this is known as negative gearing –the potential tax savings if you are in this situation can be used to trim tax paid on your usual salary.
Australian residents who provide affordable rented housing to those on a low to moderate income can also make some savings. They could be eligible to claim an additional affordable housing capital gains discount. This discount is up to 10% but they must have provided housing through a registered community housing provider. This should have been on or after 1 January 2018 for periods of at least 3 years. Other criteria include how this entity is set up and a taxation accountant will be able to verify if you are eligible for this tax incentive.
If you took on an investment home loan to finance buying the property, the interest on these types of loans could be tax deductible. If you are in the higher income bracket, it means that the after-tax rate paid could be nearly halved which is a big incentive. There are also a number of different investment loans available on the market for potential investors and to source the best package for your property development scheme, you need to speak to experienced home loan brokers.
First time buyers
As well as tax incentives, there are government grants for first homeowners. Known as the First Home Owner Grant, it is a one government payment and eligibility criteria applies. The First Home Loan Deposit scheme allows eligible first home buyers to get a home loan, if they have a small deposit (less than 20%). The First Home Super Saver Scheme helps these buyers save for the deposit by taking out an extra portion of their superannuation. As with all these schemes, different criteria will apply and information can be found on the Australian Government website. Your home loan broker will also be able to signpost you to the relevant information as well when discuss which mortgage is going to be best suited to you.
One form of tax incentive for first time buyers is they can apply for opportunities to reduce the cost of stamp duty, if not avoid paying for it altogether. This tax is state based, so the cost varies and is linked to the cost paid for the new home. It can be a cost that new buyers have not factored into the budget when reviewing the choice of mortgages and repayments, so any savings on this is going to be a bonus.
Different types of home loans
There are a number of different loans that when discussing these with your broker, you can ask if there are current 2021 tax incentives in place. Fixed rate loans allow the homeowner to manage the fixed rate repayments over a specific time period, so interest rate does not increase.
Variable rate loans are for those homeowners who want to have a competitively priced loan but one that is flexible – allowing them to switch to another interest rate at any time. For buying a new home or an investment property, these have a range of features, from flexible payments to offset facilities.
First time buyers are often attracted to the discounted rate loans, especially when trying to keep repayments to a minimum. The interest rate in these loans is set at a level that is below the variable interest rate. There may be penalties that apply if the loan is fully paid up earlier than the end of the discounted period or administration costs, which a broker would go through with you.
Line of credit loans are different from the above types of borrowing in that they are an interest only facility. If you are a homeowner looking to get access to the equity in your property and can ensure you keep up repayments to ensure the balance of the loan is kept under the approved limit – this may be an option for you.
In order to keep up to speed with what tax incentives you can benefit from as a home owner in 2021, speak to your local home loan brokers today.