Housing was the theme of this year’s budget, addressing the construction industry’s demands for a stronger workforce, financial relief, and builds to work on.
Treasurer Jim Chalmers delivered the federal budget on Tuesday May 13, which highlighted the government’s first priority: helping young Australians become home-owners.
One key step is building new homes, so here’s a look at what this year’s budget offers the workers and companies who’ll be building them.
Businesses benefits
The cost of living crisis has bled into small tradie businesses which make up 98 per cent of all construction firms in Australia.
93 per cent of these businesses, which employ and train apprentices, experienced ‘moderate to high financial pressure’, according to a recent cost of living survey*.
A further 72 per cent said conditions have worsened over the past 12 months.
SEE MORE: Tradie Tough Tests
The government has committed a total of $2.3 billion over the next five years in an overall package to help up to 85,000 small and medium-sized enterprises (SMEs).
The eye-catching $20,000 instant asset write-off policy was made permanent for SMEs, as well as some tax relief for companies with up to $1 billion in turnover starting July 1.
Regarding their recent losses, companies will be able to report lower profits from the last two years, now eligible for refunds on their lowered tax bills.
Worker support
The government sprinkled some bonuses into the budget for Australian workers.
Australians who earn income in the form of a wage will receive a $250 tax offset, though it won’t be until July 2028 that this cash shows up in their bank accounts.
The government linked this delay to warnings that it could fuel inflation if it’s made effective straight away.
A new $1,000 instant tax deduction on work related expenses means around 6.2 million workers won’t need to claim individual items, with expected average savings of $205.
These policies are aimed at lifting financial pressure off the Aussie worker, costing the government $6.4 billion across the coming four years.
Francis Lemaire, a third year carpentry apprentice from Melbourne, isn’t complaining about the perks, but hoped this money could have gone to something more productive.
“If I found $250 on the floor it would be awesome, but I feel like for the whole year it would cover me two weeks,” he said.
“I mean a six-and-a-half billion dollar cookie being broken up into these little crumbs… I would prefer they just pay apprentices more so more people would want to be one.”
Calling for reinforcements
The budget reforms revolve around the new-home market, but the Housing Industry Association (HIA) warned the workforce won’t be able to keep up.
HIA Chief Executive of Industry and Policy Simon Croft said the single biggest challenge in building more homes is a lack of access to skilled workers and apprentices.
“HIA’s Federal Budget submission highlights that demand for skilled trades has consistently outstripped supply, with acute shortages in carpentry, bricklaying, plumbing, electrical trades and other critical residential construction occupations,” Croft said.
“At the same time governments are seeking to dramatically increase housing supply, the industry is grappling with an ageing workforce, falling apprentice commencements and growing competition for skilled labour across multiple sectors.”
After the budget’s release, what changes can we see that address these issues?
Highly skilled migrant workers
Migration has been a highly contentious topic in recent elections, and the construction industries have demanded that admissions narrow in on trained migrants and qualification recognition.
Mr Chalmers announced in the budget that migrant acceptance tests will be reformed, admitting younger, better educated, and higher skilled candidates.
The recognition of foreign qualifications is time and resource consuming, and with 1 million more skilled migrants expected by 2029, pressure is high to reinforce the workforce.
This budget pledged to expedite this process, as well as a $722.8 million boost for apprenticeship commencements and completion.
The package covered support payments and living-away-from-home allowances for young tradies, as well as incentives and subsidies for employers.
Building More Homes
The biggest changes in Tuesday’s budget was lowering the Capital Gains Tax (CGT) discount, and placing restrictions on negative gearing, with hopes to unclog the existing housing market.
Carpentry Australia Head of Development Nathan Quinn said while many of these measures help bolster the skills pipeline, they don’t necessarily tackle the costs a business takes on when training apprentices.
“Many carpentry businesses are continuing to face challenging conditions, with rising interest rates, fuel costs, insurance premiums and broader cost-of-living pressures affecting consumer confidence and investment across the building sector,” he said.
“Small business operators have also raised concerns around the growing financial and taxation pressures associated with running, sustaining and eventually selling a business, particularly after years of reinvesting into staff, apprentices and business growth.
“While the Budget included positive measures such as continued investment in housing and skills initiatives, along with the permanent extension of the $20,000 instant asset write-off, many businesses remain concerned about the increasing cost of employing and training apprentices following recent changes to employer incentive programs.”
Capital gains tax
Australians who have held on to assets — be it investment properties, shares, or crypto — for longer than 12 months claim capital gains when they decide to sell, which is taxed under the CGT.
Prior to the budget reforms, the CGT was discounted by 50 per cent, initially intended to encourage Australians to invest, but led to investors holding on to their assets until retirement for the cash boost.
Labor has cut the discount to 30 per cent, where investors will now only be taxed on ‘real’ capital gains relative to inflation.
Why would this mean new homes? Because they placed an exemption on investors who buy new properties, so if they want the extra 20 per cent tax discount they can get it by contributing to the housing market.
Foreigners have also been banned from buying existing properties, but are still allowed to purchase new homes, extending the housing construction initiative to our overseas buyers.
Negative gearing
Negative gearing has helped property investment become a sustainable source of passive income for many Australians, where the rental losses on investment properties could be calculated and taken off their income taxes come the new financial year.
However, negative gearing may have made it so profitable that some investors began collecting properties in excess, clogging up the housing market.
In the budget Jim Chalmers made the bold decision to reform negative gearing — thus breaking an election promise not to touch it — in order to discourage investors from purchasing existing homes for income purposes.
This doesn’t mean investors will stop buying altogether, because landlords will be exempt from the changes to negative gearing — once again — if they buy a new home.
Grandfathering is in place, so Australians who already have investments can conduct business as usual, but the initiative steers investors to start shopping in the new-housing market.
What does this mean for construction?
The CGT and negative gearing reforms are expected to help 75,000 Australians buy their own home over the coming decade.
However, that doesn’t mean that many new homes will be built, as this figure includes the existing properties that will be freed up on the market.
Instead, the government anticipates 30,000 new homes to be constructed across the next decade.
CEO of Master Builders Australia Denita Wawn thought these policies fell short against the numbers they were promised.
“The Government’s broken promises on CGT and Negative Gearing dilutes many of the positive features of tonight’s federal budget. The opportunity that exists to turbocharge housing supply has been lost,” she said.
“Leading into tonight, the National Housing Accord is forecast to be over 200,000 homes short of target and building a new detached house is now 48.6 per cent more expensive than it was right before the pandemic.”
Laying the groundwork
To help speed up the construction of new homes, the budget pledged $2 billion to building residential infrastructure.
Councils and utility companies will share this money over the next four years for roads, pipes, power, and sewerage, laying the foundation for suburban building.
Construction firms can also expect lower red tape costs and reform in Environment Protection and Biodiversity Conservation (EDPC) guidelines.
The government projects government regulation compliance will be cut by $10 billion a year so builders can start more projects quicker and for cheaper.
*Institute of Automotive Mechanical Engineers (IAME)
