On 9 May 2017 the Federal Government released the 2017 / 2018 Federal Budget. To further the aim of, ‘improving Australians’ access to secure and affordable housing across the housing spectrum’, a number of changes were introduced in this budget that are of particular interest to the property industry. On the face of it, if anything, most of the new provisions should increase activity in the real estate market.
Details follow with links to the relevant Budget 2017 fact sheets, where available.
- First Home Super Saver Scheme — From 1 July 2017, those saving for a deposit to buy their first home will be able to gain tax advantages by voluntarily contributing to their superannuation accounts—up to $15 000 per year and $30 000 in total, per individual. Many PAYE employees will also be able to make these contributions pre-tax under salary-sacrifice arrangements.
These voluntary contributions will be able to be withdrawn for a first-home deposit from 1 July 2018, when they will be taxed at the marginal rate applicable to the individual, less a 30% tax offset. Members of couples planning to buy a home together can both take advantage of these new provisions, doubling the rate at which their savings for a deposit could accelerate.
Existing superannuation caps apply to this scheme, which will be administered by the Australian Taxation Office (ATO). While non-concessional (post-tax) contributions can also be made under the scheme, they will not receive a tax concession. Post-tax contributors should still benefit from participating.
- Reducing barriers to downsizing — To encourage older singles and couples to downsize their large family homes, from 1 July 2018 those aged 65 and over will be able to make a non-concessional (post-tax) superannuation contribution of up to $300 000 from the proceeds of selling their homes. This measure is exempt from existing age limits and from the current work test. These contributions will be additional to existing voluntary contribution caps.
To take advantage to this provision, the home sold must have been the seller/s’ principal place of residence for at least 10 years. Both members of a couple who own a home together are eligible to take advantage of the downsizing cap, meaning they could jointly contribute up to $600 000 to their superannuation accounts.
The aim of this provision is to free up housing stock of larger homes for purchase by those with growing families.
- Tax incentives for investors in affordable housing — To increase investment in affordable housing, from 1 January 2018 the Capital Gains Tax (CGT) discount for Australian resident individual investors in qualified affordable housing will increase to 60% (up from 50%).
To qualify for the higher discount, the housing being invested in must:
- be let at below market rent and available to eligible tenants on low to moderate incomes
- be managed through a registered community housing provider
- be held for a minimum of three years as affordable housing.
- Fewer tax deductions for rental property owners — Travel and accommodation expenses tax deductions previously allowed for residential rental property owners will no longer be available from 1 July 2017. However, tax deductions for this purpose will still be allowed for amounts paid to third parties, such as agents and property managers.
In addition, the tax deductions allowable for depreciation on the plant and equipment for residential investment properties will be limited to the amount incurred by the owner.
You may also wish to read A Comprehensive Plan to Address Housing Affordability for an overview of the Federal Government’s budget strategy as it relates to the property industry.
We will be ensuring that all our clients’ transactions are carried out in accordance with the changes being introduced in the 2017 / 2018 Federal Budget. All the members of our professional conveyancing team will be briefed on the issues and ramifications arising from them so they can assist you should these changes have an impact on your property transactions.