October 2020: the Budget that brought forward tax cuts
Stage 2 tax cuts were back-dated to 1 July 2020. The instant asset write-off was uncapped for most businesses. The Budget was unambiguously pro-investment.
Cash flow into the system
Stage 2 lifted the 19% threshold from $37,000 to $45,000 and the 32.5% threshold from $90,000 to $120,000. For a typical investor on $130k, the cuts plus LMITO delivered roughly $2,500 of extra after-tax income — directly serviceable into a new loan.
Why investors moved
With borrowing capacity expanded by the income side and rates anchored on the cost side, FY21 became a borrowing-capacity-led market. The investors who acted in October 2020 borrowed at the top of their bracket before APRA started tightening serviceability in late 2021.
Dax Stanley
Founder & Principal Strategist, Hera Property. #1 international bestselling author of Real Estate Investing Using ChatGPT.