There’s no denying property was a hot topic for the 2017/18 Federal Budget. There are a number of new measures that will have an impact on current and future property investment structures.
From first home buyer savings to what investors can claim at tax time, here are some key changes to note if you’re in the property market.
First home buyers
From July 1, 2017, first home buyers will have the option of using up to $30,000 of voluntary superannuation contributions to place a deposit on a property. The measure, which is aimed at helping young people crack the property market, is expected to cost the federal government $250 million over the next four years.
First home buyers will be allowed to withdraw any contributions beyond the current 9.5% super guarantee to buy property. The maximum withdrawal amount is $30,000 effective from July 1 2018, and contributions can be made from July 1, 2017.
Tax deductions relating to expenses incurred while visiting properties will be completely scrapped. Previously, investors could claim travel costs when visiting an investment property, with no limit on the number of visits per year.
Tougher rules will be implemented in an effort to tighten compliance around foreign investing. This includes a move to ban developers from selling more than 50 per cent of a new project to foreign investors.
Under the new Budget, foreign investors will also be hit by a new $5,000 annual levy if their property is left vacant for more than six months.
There are also new rules surrounding foreign investment and capital gains tax. From July 1, foreign and temporary tax residents will no longer be exempt from a capital gains tax when selling their main residence in Australia. It’s important to note that existing properties held prior to this date will be grandfathered until June 30, 2019. Moreover, foreign investors will now pay a 12.5% capital gains withholding tax when they sell their property, up from 10%.
Interest rate hike
Australia’s big four banks will be slapped with a new tax on the majority of their funding. Starting from July 1, a 0.06 per cent annual levy will be added to certain key funding sources. This measure will only affect banks with liabilities over $100 billion, including Commonwealth Bank, Westpac, National Australia Bank, ANZ and Macquarie.
This new bank levy means homeowners and property investors could feel the pinch, with a potential interest rate increase on the cards.
There will be a tightening of depreciation deductions for investment properties. Investors of negatively geared properties will be unable to claim depreciation deductions on items such as dishwashers, washing machines and ceiling fans.
The federal government will also introduce a plan to no longer allow subsequent owners of a property to claim deductions on items purchased by the previous owners of the property.
Incentivised to downsize
Australians over the age of 65 will be incentivised to downsize. From 1 July 2018, those over 65 who sell their residential property of a decade or more will be able to put up to $300,000 in sale proceeds into their superannuation.
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