Housing and housing affordability featured strongly in this year’s 2017 Federal budget, with the government sought to address the housing supply issue by:
- limiting the foreign ownership of new developments to 50%.
- imposing of a ghost tax for properties owned by foreigners and kept vacant.
- providing incentives for retirees to down size to create further supply.
They are also encouraging first home buyers to save, via the First Home Super Saver Scheme. This will mean that saving a deposit will become a little bit easier, but still a massive task.
Investors did get some tightening of what they can deduct. This includes depreciation and travel expense deductions. But there was no changes to negative gearing or capital gains like many feared.
Four key housing changes from the budget you need to know.
First Home Super Saver Scheme
From 1 July 2017, first home buyers can make voluntary contributions of up to $15,000 per year and $30,000 in total into their superannuation account. These can be salary sacrificed into superannuation via pre-tax contributions.
Contributions are taxed at 15 per cent and can be withdrawn for a deposit on a property. Withdrawals are taxed at marginal tax rates less a 30 per cent offset and allowed from 1 July 2018.
The First Home Super Saver Scheme could boost their savings by 30%. When compared with saving through a standard deposit account.
“Ghost house” or “empty home” tax for foreign investors
This tax is to discourage foreign investors from buying residential property and leaving them vacant. Foreign investors who keep properties vacant for more than six months will be charged with a vacancy tax.
This tax could be the equal to the foreign investment application fee which was paid at the time of application and will be charged annually.
This change is intended to get more vacant homes onto the rental market and will apply from budget night 9th May 2017.
Retirees given incentives to downsize
Older Australians will be encouraged to downsize and free up housing stock for younger families.
People aged 65 and older will be able to make a non-concessional contribution of up to $300,000 to their superannuation after selling their home.
This will be in addition to any other contributions they are eligible to make and will apply from 1 July 2018.
Property investment deductions tightened
Depreciation deductions for plant and equipment items such as washing machines and ceiling fans will only be allowed only if the investor bought them.
Investors who previously had tax deductions for travel expenses related to their investment property will no longer be able to make these claims.
Both these changes are effective 1 July 2017.
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Theo Angelopoulos is mortgage broker with over 15 years of banking and finance experience. Theo is the Director and Founder of The Loans Analyst. A boutique mortgage broking advice firm based in the Sydney CBD that helps clients to buy property, provide strategic loan structuring advice and helping get a great deal on their home loan.
