The Federal Budget and Property: The three things that you need to know
On 9 May 2017, Treasurer Scott Morrison presented the 2017-2018 Federal Budget to Parliament. The Budget outlined an array of changes to many different sectors. In this article I will guide you through the three key changes which the Budget has proposed in relation to the property landscape.
1. First Home Super Savers Scheme
On 1 July 2017, the government introduced the ‘First Home Super Savers Scheme’. This scheme has been devised in order to encourage first home buyers to purchase a home.
How it works
The scheme works by allowing first home buyers to salary sacrifice up to $15,000 a year into their superannuation fund. The overall contribution will be capped at $30,000. The earnings will be taxed at a rate of 15% as opposed to the higher marginal rates. If a couple is involved, both members will be able to contribute $30,000 each.
2. Older Australian Concessions
The government is attempting to increase the amount of property for purchase across the country. One of the key ways that they are trying to achieve this is by allowing home owners who are over 65 to put up to $300,000 from the sale of their home into their superannuation fund in an effort to encourage older Australians to downsize. However, to be eligible, the home must be their principal place of residence for at least 10 years. The scheme is set to begin on 1 July, 2018.
3. Foreign Property and Developers
Extra charges for foreign property owners
The government also aims to require foreign property owners to pay a charge of at least $5,000 for residential properties which they own if the property has been vacant for at least six months. The extra charge takes effect for properties purchased after 9 May, 2017.
Capital gains exemptions and tax
In addition to an extra charge, from 9 May foreign property owners are prohibited from tax exemptions on capital gains (which is any profit from the sale of a property). The capital gains tax increased to 12.5% from 1 July, 2017 (currently 10%). Withholding tax that is usually applied when a foreign property owner sells a property for more than $2,000,000 or is now applied to properties sold for $750,000 or more.
A new cap of 50% on the amount of properties that developers can sell to foreign buyers will be introduced.
These three proposed key changes attempt to assist younger Australians to purchase their first home, encourage older Australians to downsize and also attempt to put some limits on foreign investment.