The impact of tax cuts on borrowing power - Mortgage DomayneSkip to main content

The impact of tax cuts on borrowing power

May 18, 2024

A lot of chatter at the moment about Macquarie Bank with industry commentators suggesting the notion of Australia’s “big four banks” now be expanded to the “big five banks”. Based on recent market capitalisation data, Macquarie isn’t far behind ANZ and is streets ahead of Suncorp at number 6, as illustrated below.

  1. Commonwealth Bank of Australia (CBA): AUD 190.74 billion
  2. National Australia Bank (NAB): AUD 105.09 billion
  3. Westpac Banking Corporation (Westpac): AUD 89.77 billion
  4. Australia and New Zealand Banking Group (ANZ): AUD 84.27 billion
  5. Macquarie Group: AUD 71.24 billion
  6. Suncorp Group: AUD 17.6 billion

Macqurie customers were advised this week that as of May 20th, they will be ditching cash and cheques at all its offices as the organisation goes fully digital. So from Monday, Macquarie Bank customers will be unable to access over-the-counter services, deposit or collect cheques or order new chequebooks.

In this week’s newsletter, we take a look what impact this weeks budget will have on borrowing capacity. Spoiler alert – it’s good news!

Starting next financial year, most taxpayers will see an increase in their take-home pay, with adjustments to tax rates significantly reducing their tax bills. This change translates to higher disposable incomes, which in turn will enhance the borrowing capacities of potential homebuyers, providing them with more funds for property purchases.

These tax cuts are expected to assist homebuyers, particularly as housing affordability reaches its lowest point in three decades. From July 1, all taxpayers will benefit from the stage three tax cuts, with the specific amount of savings depending on their income level.

Government estimates indicate that:

  • An individual earning the average wage of $73,000 will receive a tax cut of $1,504.
  • Those earning $45,000 will get an $804 annual tax cut.
  • Individuals with an income of $100,000 will save $2,179.
  • High earners making $150,000 will benefit from a $3,729 annual tax cut.

How Tax Cuts Can Enhance Buying Power For homebuyers:

  • An individual with an income of $100,000 could see their borrowing capacity increase by approximately $25,000.
  • Someone earning $150,000 might be able to borrow an additional $37,000.

Since May 2022, borrowing capacities have decreased by about 30% due to rising interest rates.

However, first-home buyers, especially those targeting properties at the more affordable end of the market, stand to gain the most from the increased borrowing capacities resulting from these tax cuts. Nevertheless, it’s important for buyers to avoid stretching their borrowing limits to the maximum.

Variable

The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.

1 Year Fixed

The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.

Make an enquiry

Please enable JavaScript in your browser to complete this form.

Testimonials

So, what is it our customers love about us?

  • People first

    We put our customers at the centre of everything we do. Everything is geared around you.

  • Making it easy

    We'll take care of everything so you can focus on what's important.

  • Experienced brokers

    With years of experience, our brokers will answer all your questions. Simple.

  • We're in it together

    From the first chat right through the life of the loan, we're here for you.

  • Great rates

    With access to a huge range of loans and lenders, our brokers will make sure you secure a great rate.

  • Tailored solutions

    We'll sit down and discuss your specific needs. Your loan will be tailored specifically to you.

Give us a call

Our highly experienced brokers are here to help to you. Call anytime for a no-obligation chat.

Call 1300 366 296

Book an appointment

Our highly experienced brokers are here to help to you. Call anytime for a no-obligation chat.

Book an appointment