How the 2018 Federal Budget will affect Land and Property Owners
Assisted by Natasha Mustac.
The recent release of the 2018 Federal Budget affects all Australians, so it is crucial to understand its key elements, and the impact that it is likely to have on you and/or your business. The new Budget affects a wide range of property areas, although one particular area of interest is the affect that it is set to take on 'land banking' and housing affordability.
Implications on land banking:
The 2018 Budget has already been heavily criticised for targeting property owners with vacant land, with a new budget measure aimed at discouraging 'land banking'. 'Land banking' refers to the process of buying large lots of undeveloped land with the overarching goal of selling the land for a profit in the future, once it has been approved for development.
At present, under current tax settings, property owners can claim deductions for land they never intend to make an income from, while banking the land in the hope of later selling it for a windfall when property prices have increased. The issue with this process means that the land held back can no longer be used for housing or other development. However, new budget measures intend to decrease the popularity of land banking.
Under the 2018 Budget, owners of vacant land will no longer be able to claim expenses such as council rates and maintenance costs in their tax returns. This measure does not apply to land owned and used to carry out a business, including the business of primary production. The introduction of this measure is estimated to reap the government $50 million in revenue over 2020-21 and 2021-22.
Implications on housing affordability:
While not considered perfect, the 2017 Budget was applauded for its capital component, which looked at how to effectively use rent as well as creating new incentives to get states and the private sector to do more. However, the 2018 budget has been heavily slammed with criticism over housing affordability, due to its silence on the matter altogether.
National Shelter executive officer Adrian Pisarski scrutinised the silence on housing affordability within the 2018 budget. Pisarski further stated that the budget failed in the sense that there 'was no boost to Commonwealth Rent Assistance to alleviate the crippling rent paid by the lowest income households, no new supply strategy, no tax reform to end the distortions and rebalance the market and nothing to help Gens X and onwards get into the market'.
While past Budgets have proposed rewarding downsizers for freeing up larger homes and making way for emerging families, the 2018 budget actually encourages older Australians to 'cling' onto their family home. The expansion of the pension loan scheme encourages older homeowners to hang onto their property by allowing pensioners to borrow against both the value of their home and other assets without selling up. This poses difficulty for Gen-X Australians in terms of buying affordable housing, particularly as there are likely to be less houses available.
If you have a query relating to any of the above information, or would like to speak with one of our Commercial Property lawyers regarding the 2018 budget and how it is set to affect your land and property holdings, please don't hesitate to get in touch with: