The Government will adjust the benchmark interest rate that applies to capital protected borrowings to the Reserve Bank of Australia (RBA) indicator rate for standard variable housing loans plus 100 basis points, instead of the RBA indicator rate for standard variable housing loans as announced in the 2008-09 Budget.
The measure will apply to capital protected borrowings entered into from 7:30 pm (AEST) 13 May 2008. This measure has an ongoing cost to revenue estimated to be $28 million over the forward estimates period.
The Government will also extend the transitional arrangements for capital protected borrowings entered into at or before 7:30 pm (AEST) 13 May 2008 from the announced 13 May 2013 to 30 June 2013.
"Lifting the benchmark interest rate by 100 basis points will allow borrowers to allocate a smaller proportion of the expenses on the borrowings on costs for capital protection, which is not deductible if on a capital account," the Assistant Treasurer said.
For more information, see the Assistant Treasurer's media release, No 2010/94, 11 May 2010.