The Federal Government announced a raft of proposed changes to address the issue of housing affordability in last night’s 2017 Federal Budget. Primarily designed to help first-home buyers save for their first home and incentivise downsizers through generous superannuation concessions, the changes are a welcome step in addressing housing supply and making saving for deposits easier.
From July 1 2017, all Australians will be given the option to save for their first-home through salary sacrificing into their superannuation – enabling them to fast track their deposit by paying less tax. The salary sacrifice of up to $15,000 a year, to a total of $30,000, from pre-tax income will attract the same tax benefits as superannuation, and is expected to leave savers about 30 per cent better off overall than if they had saved through a traditional savings accounts.
Retirees and/or empty nesters have been given an incentive to downsize in a bid to increase the supply of larger homes. Homeowners aged 65 and over, who sell the family home they have lived in for more than 10 years will be able to make a non-concessional contribution of $300,000, or $600,000 for couples, to their superannuation from the proceeds of the sale, on top of any other contributions they are eligible to make. This new incentive will be in addition to the concessions already in place, and importantly will be exempt from the age test, work test and $1.6M balance test.
Negative gearing will remain in place, but rules have been tightened around what can be claimed, specifically travel expenses and depreciation deductions from July 1. Depreciation deductions for plant and equipment items, eg washing machines and ceiling fans, will only be allowed if the investor actually bought them. Investors will also no longer be able to claim tax deductions for any travel expenses relating to their investment property.
Foreign property investors will now be exempt from claiming a main residence exemption for capital gains and be subject to higher capital gains tax rates. Sales in any new development will be also be capped at 50 per cent to non-residents. Additionally, there will also be a levy of at least $5,000 per annum on all foreign investors who fail to either occupy or lease their property for at least six months of the year, to encourage vacant properties to be added to the rental market.
To discuss how these changes will affect you in further detail, or for a free property report detailing recently sold properties in your building or suburb, please contact our team on 9091 1400.