On 1 July 2024, stage three income tax cuts came into effect across Australia, effectively giving most taxpayers a pay rise.
We explore what impact this is likely to have on the Perth property market.
What exactly are the stage three tax cuts?
These tax cuts are the third in a series of planned tax cuts first introduced by the Turnbull government.
Stage one came into effect in 2018, while stage two was rolled out in 2022. These first two rounds of changes impacted thresholds and tax rates, mainly for low-to-middle income earners.
The latest round of tax cuts are slightly different in that high income earners receive more benefit than those with lower incomes as the table below shows:
How tax rates will change from 1 July 2024
| 2023-24 | 2024-25 | ||
|---|---|---|---|
| Income threshold | Tax rates | Income threshold | Tax rates |
| $18,200 or less | Tax free | $18,200 or less | Tax free |
| $18,201 – $45,000 | 19% | $18,201 – $45,000 | 16% |
| $45,001 – $120,000 | 32.50% | $45,001 – $135,000 | 30% |
| $120,001 – $180,000 | 37% | $135,001 – $190,000 | 37% |
| Over $180,000 | 45% | Over $190,000 | 45% |
Everyone who currently pays tax will pay a little less, effectively giving the population a pay rise at a time when the rising cost of living means we could all do with one. The government’s calculator reveals the savings you might expect to gain, depending on your income:
- If you earn $50,000 per year you may receive an extra $929 in your take home salary.
- If you earn $98,098 per year (which happens to be the average full-time annual salary) you may take home another $2,131.
- If you earn over $190,000 per annum you may take home another $4,529.
How will these tax cuts impact the Perth property market?
These tax cuts provide most people with a slightly higher income. However, averaged out across 12 months it’s not a huge amount, even for the highest earners.
That means it’s unlikely to have a large, or instant impact on the property market, but it could have a small impact in three ways:
- More disposable income provides people with a little more money to save to buy a property, to pay off a mortgage, or spend on rent.
- A slightly higher income could theoretically increase someone’s borrowing capacity, allowing them to spend more on a property, or even invest for the first time. Estimates range from a few thousand up to an additional $50,000 or even $75,000 on a standard mortgage for a couple, depending on their circumstances.
- If buyers’ budgets are bigger, and they are able to afford slightly more, it could stimulate both the sales and rental market, and increase weekly rents and sales prices a little. Given that affordability is already a chronic issue for the rental market, and sales prices have been on the rise for years, it may not actually be welcome news for renters or buyers.
The Perth property market right now
We reported in Autumn that Perth’s property market was the strongest in the country, and that has continued through winter.
CoreLogic reported that, in July 2024, our city recorded the country’s highest monthly (2% over July), quarterly (5.6% in the July quarter) and annual growth (24.7%), to reach a median property value of $773,335.
Despite leading when it comes to price rises, Perth is still affordable compared to other capital city markets. It was beaten only by Darwin and Hobart when it comes to the cheapest median price for a capital city.
The rental market is also very tight, with median weekly rents increasing 12.7% over the past year, to hit $650 for houses and $600 for apartments, according to REIWA. Perth is also very attractive to investors as it offers some of the best yields in the country, at 4.3%.
With all this in its favour, and slightly more money in people’s pockets from the stage three tax cuts, we believe that the only way is up for Perth’s property market in the short term.
Want more?
The government’s calculator reveals the savings you might expect to gain, depending on your income. And, you can try using a free online mortgage calculator to see if it alters your borrowing power.
If you’re interested in buying or selling, renting or investing in Perth property, get in touch with our experienced team today.
