First home owners and downsizers are the winners in the Budget – Note: These changes are proposals only and may or may not be made law.
Here’s a quick summary of how it impacts our housing market. Please let us know if we can help you in these circumstances:
- If you’re a first home buyer: From 1 July 2017, 1st home owners can make voluntary super contributions up to $15k pa and $30k in total to use towards a home deposit. With the new First Home Super Savers Scheme, savers can contribute from their before-tax income into their superannuation fund. You will be able to withdraw that cash, along with any earnings, from July 1, 2018. The deposit will attract the tax benefits of superannuation — contributions and earnings will be taxed at 15 per cent, and withdrawals will be taxed at 30 per cent below the marginal tax rate.
- If you have a mortgage: Australia’s 5 biggest banks will pay a new 0.06% levy on their liabilities, raising $6.2b over 4 years. Liabilities of course include home loans. Mortgage holders will be watching to see what the banks to do to interest rates to pay for the levy.
- If you are a property investor: As anticipated, negative gearing remains, but property investors won’t be able to claim travel expenses and some depreciation deductions beginning July this year including plant and equipment items such as washing machines and ceiling fans. From budget night, you will only be able to claim the deductions if you actually purchased the item yourself. In the past, successive investors were able to claim depreciation on the same items, well in excess of their value.
- If you’re a downsizer: From 1 July 2018, people over 65 can contribute $300k into their super from the proceeds of selling their home. This is aimed to encourage retirees to free up stock for young families entering the market. They must have held the home for at least 10 years and it has to be their principal place of residence. And both partners in a relationship can do this, meaning combined they can contribute up to $600,000 to super.
- If you’re investing in property through your superannuation: When a new Limited Recourse Borrowing Arrangement is established, the loan balance will be included in the individual’s total super balance.
- Affordable Housing CGT discount: from 1 January 2018, eligible people will receive a further 10% CGT discount.
- If you’re a foreign property owner: Effective immediately, foreign property owners will no longer receive the CGT exemption on their principle place of residence. A new CGT rate of 12.5% will apply.
- Increase to Medicare Levy: From 1 July 2019, the levy will increase from 2% to 2.5%. This is to help fund the National Disability Insurance Scheme. Those on an income of $50,000 will pay $250 extra a year for the levy, those on $150,000 will pay $750 extra a year for the levy.