How Stage 3 Tax Cuts Can Lift Your Borrowing Power

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Who doesn’t love a tax cut? Starting from 1 July, most of us are just weeks away from saving on our tax bills with the Stage 3 tax cuts. But there’s another key benefit: these cuts could significantly lift your borrowing power.

The upcoming Stage 3 tax cuts have sparked a lot of debate, but today, let’s focus on how they might benefit you financially.

These Australian tax cuts for 2024 are set to benefit around 13.6 million Australians, with savings varying based on income. For instance, someone earning the national average wage of approximately $73,000 will save $1,504 annually in taxes, according to the federal government. If you earn $100,000 a year, you could see a tax saving of $2,179 each year.

For households grappling with rising living costs, these tax cuts couldn’t come at a better time. But if you’re looking to buy a new home, the tax cuts might offer an unexpected advantage: a boost to your home loan borrowing power.

What is Borrowing Power?

Borrowing power, or borrowing capacity, is the amount a lender is willing to lend you. It depends on several factors, including the size of your deposit, household expenses, and your after-tax income (or take-home pay). The higher your after-tax income, the more you may be able to borrow, potentially allowing you to purchase a home sooner or buy a more expensive property.

How the Tax Cuts Might Affect Your Borrowing Power

Some lender calculations now indicate that for a single person earning $100,000, the Stage 3 tax cuts could increase borrowing capacity by an additional $21,000. A couple with a combined income of $150,000 could see their borrowing capacity rise by nearly $30,000. This makes the upcoming tax cuts great news if you’re in the market for your first home or looking to upgrade.

Even if you don’t plan to borrow more, the increase in your take-home pay could make managing your current home loan repayments easier.

Other Ways to Boost Your Borrowing Power

You don’t have to wait for the Stage 3 tax cuts to improve your home loan eligibility. Here are some other strategies:

  1. Trim Spending
    Reducing non-essential expenses can free up extra cash to grow your deposit. Since household expenses are a key factor lenders consider, cutting back on regular costs can increase your borrowing power.
  2. Reduce Your Credit Card Limit
    Lenders look at the maximum limit on your credit card, not just the outstanding balance. Reducing your credit card limit or paying it off entirely can improve your borrowing power.
  3. Increase Your Income
    Although it may be easier said than done, taking on extra shifts, negotiating a pay rise, or starting a side hustle can boost both your bank balance and borrowing power.

Find Out How Much You Could Borrow

While online calculators can provide a rough estimate of your borrowing power, they don’t account for the specific criteria used by different lenders or your unique financial situation. That’s why it’s important to talk to us. As home loan experts in  Australia, we can understand your expenses, your goals, and the type of property you’re interested in, and can help you create a plan to make your home ownership dream to become a reality.

1800 35 62 67

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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