What the Federal Budget 2017 means for property
Treasurer Scott Morrison has delivered his Federal Budget 2017 last night, but what does the budget really mean for property buyers and investors in Australia? Here are six key changes to be aware of if you already own a property or are thinking about purchasing one in the near future.
6 Key changes from the Federal Budget 2017 affecting property buyers
1. First Home Buyers
There’s good news for first home buyers looking to save up a deposit for their first home. The new 2017 budget states that they will be able to use their superannuation towards buying a home from 1 July 2017.
What this means is that savers will be able to salary sacrifice up to a maximum of $30,000 or $15,000 per year from their pre-tax income over the compulsory superannuation contribution. You can then withdraw this cash plus any earnings a year later from 1 July 2018 to use towards a house deposit. By putting savings in your superannuation, the funds are taxed at just 15 per cent, whilst withdrawals will be taxed at 30 per cent below the marginal tax rate. This is thought to help accelerate savings by at least 30 per cent, compared to using a normal savings account. The measure is also likely to boost demand in the housing market, whilst put upward pressure on property prices.
2. Tax deduction changes
The rules for property investors are also changing. Investors will no longer be able to claim tax deductions for travel expenses such as when visiting their investment property, due to many investors using this deduction for private travel instead. This will hit interstate investors the hardest who currently can claim their accommodation and airfare when visiting their investment property. With greater out of pocket expenses, this could mean less property visitations and even a decline in tourism, especially for properties in tourist hotspots such as the Gold Coast. This measure is expected to save approximately $200 million annually.
3. Depreciation deduction limitations on plant and equipment items
The amount that property investors can claim on depreciation deductions is also changing. Investors of negatively geared properties will be unable to claim depreciation deductions on items such as dishwashers, washing machines and ceiling fans under the new federal budget. You can now only claim deductions if you personally purchase the item yourself.
4. Rising interest rates
With Australia’s five biggest banks being hit by a new multi-billion dollar levy as well as a suite of stepped-up controls and penalties, this means that home loan interest rates are expected to rise. Westpac, ANZ, Commonwealth Bank, National Australia Bank and Macquarie Group will be hit with a new levy of 0.06 per cent that is expected to reap $6.2 billion in revenue for the government over the next four years. It is expected that although homeowners will be hit with an increase in home loan interest rates, property investors will be hit the hardest. Now might be the time to start thinking about fixing your interest rate before these rises occur.
5. Foreign investors
Under the new federal budget, foreign investors will be hit by a new annual $5,000 levy if their property is left vacant for more than six months. There are also new rules that will mean foreign investors in Australian property will no longer be able to claim primary residence exemption for capital gains tax purposes. This is expected to bring in an extra $581 million over the next four years. In order to give Australian buyers a greater opportunity to purchase property, developers of new property are not allowed to sell more than 50 per cent of their stock to foreign investors.
For those living in a large house, now might be the time to sell. From 1 July 2018, people aged 65 years or over will be able to make a non-concessional superannuation contribution of up to $300,000 from the proceeds of their primary residence, provided they have lived there for at least 10 years.
If you are a couple then both members can take full advantage of this contribution, which is in addition to the current contribution rules and caps. You will also be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions. However, it’s unlikely that a large number of four or five bedroom houses will be coming on the market straight away, with this new initiative starting from July 2018.
Get in touch
To find out more about how the new Federal Budget 2017 affects you and your property purchase or your current investment property portfolio, get in touch with the iBuyNew team today. Call us on 1300 123 463.
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