New legislation has been introduced to Parliament that seeks to make housing more affordable to first home buyers, retirees and the wider Australian market.
The new legislation, first announced in the Budget, enables prospective first home buyers to save for a deposit inside superannuation through the First Home Super Saver Scheme (FHSSS), allows older Australians to contribute the proceeds of the sale of their family home to superannuation, aims to provide “better target deductions” relating to residential investment properties, and boosts the availability of rental accommodation in the market.
Under the FHSSS legislation, prospective first home buyers can contribute up to $30,000 (up to $15,000 a year within existing caps) into superannuation and withdraw the contributions from 1 July 2018. These contributions, along with deemed earnings, can be withdrawn for a deposit.
Withdrawals will be taxed at a marginal tax rate, less a 30 per cent offset.
According to the Treasury, this will be a “game changer for young Australians trying to get their first place”.
Treasurer Scott Morrison and Assistant Minister to the Treasurer Michael Sukkar said in a joint release: “For most people, the FHSSS will enable them to boost the savings they can put towards a deposit by 30 per cent compared with saving through a standard deposit account.
“This will give prospective first home buyers a significant step up at a time when saving for a deposit is becoming increasingly difficult for many people.”
Likewise, the downsizing measure will allow older Australians to use their superannuation to make savings.
From 1 July 2017, people aged over 65 will be able to make an additional non-concessional contribution of up to $300,000 into superannuation when they sell their home (which they’ve held for at least 10 years).
As both members of a couple can utilise this measure, up to $600,000 of contributions may be made by a couple from the proceeds of selling their home.
The ministers said: “Many older Australians will be attracted to take up this concession and in so doing vacate larger properties which no longer suit their needs.
“This will encourage people, who may have been put off by existing restrictions and caps, to move house and free up larger homes for growing families.”
Protecting negative gearing
The government’s “housing integrity measure” aims to restore integrity to the tax treatment of residential investment properties by disallowing claims for travel expense deductions and limiting plant and equipment depreciation deductions to new assets only.
From 1 July 2017, travel costs for individual investors inspecting and maintaining residential investment properties will no longer be deductible.
“This will improve the integrity of the tax system by preventing residential property investors from taking holidays at the taxpayers’ expense,” the Treasury said.
“By limiting plant and equipment depreciation deductions, the government is cracking down on investment property abuse by removing the existing opportunities for capital items to be depreciated by multiple owners in excess of their actual value.”
Following public consultation, the measures now enable investors to claim plant and equipment depreciation deductions in situations where a developer/renovator tenants a property prior to selling it to an investor, provided the property is: purchased by an investor within six months of the property being completed by a developer/renovator; and the developer/renovator has not claimed depreciation deductions.
“Together, the travel and plant and equipment deduction changes will improve the integrity of the tax system and are estimated to generate $800 million in revenue over the forward estimates,” the ministers said.
Lastly, a new foreign resident vacancy levy has now come into force and places an annual vacancy charge on foreign owners of residential real estate when property is not occupied or genuinely available on the rental market for at least six months in a 12-month period.
Administered by the Australia Taxation Office, the vacancy charge applies to foreign persons who make a foreign investment application for residential property from 7:30pm (AEST) on 9 May 2017.
The charges aim to increase the number of houses available to live in and provide a financial incentive for foreign owners to make their property available on the rental market.
“Through the comprehensive housing affordability package announced in the Budget, the government is radically improving outcomes across the entire housing spectrum, from first home buyers, to renters, to downsizers, to those in community and affordable housing, and those suffering homelessness,” the joint statement reads.
“This is getting on with it.”