The 2017-18 Federal Budget delivered by Treasurer Scott Morrison on the 9th of May 2017 was packed with proposed measures. Of most note was moves by the Government to address the issue of housing affordability.
In this article, we review several of these ‘housing affordability’ proposed measures that have recently passed through the parliamentary process and become law – in particular how they affect residential property investors, retirees wishing to downsize or prospective first homebuyers.
You may find it helpful to first recap on how proposals become law via our article, “From Proposal to Law”.
Residential property investors
Residential property investors are no longer able to claim a tax deduction for travel expenses for personally inspecting, maintaining or collecting rent for their residential rental property; however, can continue to claim travel expenses incurred by third parties such as property management services. This has been backdated to commence from 1 July 2017 onwards.
Furthermore, the Government has limited plant and equipment depreciation deductions to outlays incurred by the current owner of a residential real estate property; however, grandfathering arrangements may apply to existing residential real estate properties as at 9 May 2017. This has been backdated to commence from 1 July 2017 onwards.
Source: Treasury Laws Amendment (Housing Tax Integrity) Act 2017, which received royal assent on the 30th of November 2017.
Retirees wishing to downsize
From 1 July 2018, eligible homeowners aged 65 and over will be able to use the proceeds from the sale of their family home (main residence) to make a downsizer contribution of up to $300,000 each (that is, up to $600,000 per couple) into their superannuation.
This is referred to as the ‘Downsizing Measure’.
Please note:
Source: Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Act 2017, which received royal assent on the 13th of December 2017.
Prospective first homebuyers
From 1 July 2018, eligible prospective first homebuyers will be allowed to withdraw their voluntary superannuation contributions (and, an amount of associated earnings*) for the purpose of purchasing or constructing their first home. These voluntary contributions, which must be made within existing superannuation contribution caps, include concessional (i.e. personal deductible contributions and salary sacrificed amounts) and non-concessional contributions. The amount available for withdrawal will be up to $15,000 of voluntary contributions per financial year since 1 July 2017 ($30,000 in total) plus associated earnings, less tax on concessional contributions and associated earnings (e.g. taxed at marginal tax rates, less a 30% offset).
This is referred to as the ‘First Home Super Saver Scheme’.
*Calculated using a deemed rate of return, which is based on the 90-day Bank Bill rate plus three percentage points (shortfall interest charge rate).
Please note: To be eligible to take advantage of the First Home Super Saver Scheme, an individual must, for example:
Source: Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Act 2017, which received royal assent on the 13th of December 2017.
Please note: If the individual is unable to enter a contract to purchase or construct a home within the required period, they must recontribute the released amount (net of tax withheld), into super. If the funds have not been recontributed, a first home super saver tax will be imposed. The amount of this tax is 20% of the individual’s assessable first home super saver released funds.
Source: First Home Super Saver Tax Act 2017, which received royal assent on the 13th of December 2017.
Moving forward
So there are a number of proposed measures that have now become law, which aim to address the issue of housing affordability. Some impose restrictions, whilst other provide opportunities.
Whether you are a residential property investor, retiree looking to downsize or prospective first homebuyer, if you have any questions regarding anything discussed in this article then please contact us.