Budget night is always a time of great excitement for us at Logica Property. 2017’s budget brought on a host of fairly wild measures that will have noticeable impact for both home buyers and property investors
Here’s a quick overview on the 2017 budget from the view of a home buyer or property investor:
1. First home buyers will now have the ability to use their super as a low tax savings vehicle for a deposit on a home from 1st July. Individuals will now be able to make voluntary contributions to their super of up to $15,000 a year over and above their employers contributions. There is however a limit of $30,000 per person. These contributions will be taxed at 15% and can be drawn down on for first home purchases. Withdrawals of eligible voluntary contributions will be permitted from July 2018 onwards. This will replace the First Home Savers Account scheme which was vastly underused.
2. Downsizers and the over 65’s will be able to contribute up to $300,000 to super from the sale of their principle home, if they’ve owned the home for at least 10 years. This will be teated as a non-concessional contribution outside the existing caps. There will be a limit per person, couples will be able to contribute $600,000 to benefit from this measure for the same home. This measure even applies if they have reached the $1.6 million cap in a private pension. Any amounts over and above $1.6m will be placed in an accumulation account where earnings are taxed at 15%
3. Depreciation of Plant and Equipment. From the 1st of July 2017, depreciation deductions from residential plant and equipment assets (washing machines and ceiling fans etc) will be limited to investors who incur the outlay – not subsequent owners. Also from that date, investors will be unable to deduct travel expenses related to inspecting, maintaining or collecting rent for a residential investment property. So those trips to Noosa to “check on your investment” are no longer deductible.
4, Social Housing Incentive. For investors that choose to invest in affordable housing, a 10% saving in capital gains tax is up for grabs. Unfortunately, to get the tax discounts, you must hold the property as an affordable rental for a minimum period of 10 years. The solid CGT discount is being pitched as a way to offset the lower yield that an investor will receive for investing in social housing.
6. Foreign and temporary tax residents will be denied any CGT discounts from 9th may, however any purchases made prior to this date will have them offered until 30th June 2019. The CGT withholding tax rate for foreign tax residents is also being raised to 12.5% and the CGT withholding threshold for foreign tax residents is being dropped from $2m to $750k.
7. Property developers are now going to be prohibited from selling more than 50% of new developments to foreigners. This rule will only apply to developments which have at least 50 units on offer. This is a revert back to the original policy. This may actually result in reducing market supply as some developers will no longer find it viable to just sell 50% to the local market. One of the reasons apartment supply has lifted substantially is the fact that developers can sell the majority to overseas buyers.
We’re confident that successive Governments will keep fiddling with the rules around home buying and investment. The biggest obstacle with any budget is figuring out how the economy can keep seeing growth.
At Logica Property, we specialise in helping home buyers and investors find the right property. If you would like any assistance navigating the tricky waters of real estate, talk to us today.