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Our guide to the Federal Budget 2017/18

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The impacts for the property market

The much anticipated 2017 Federal Budget has finally been announced and as you’d expect it wasn’t lacking in measures related to the property market. But who came out on top and who is facing tougher times ahead? We’ve rounded up the best summaries and analysis to help you navigate the changes that impact potential and current property owners.

The winners

  • First home buyers (FHB)

Through the First Home Super Savers Scheme, from 1 July 2017, individuals can make voluntary contributions of up to $15,000 per year and $30,000 in total, to their superannuation account to purchase a first home. These contributions, which are taxed at 15 per cent, along with deemed earnings, can be withdrawn for a property deposit. Withdrawals will be taxed at marginal tax rates less a 30 per cent offset and allowed from 1 July 2018.

The upshot: tax concessions to save means FHB can build a home deposit more quickly.

There’s a great summary on AFR.

  • Downsizers

To encourage downsizing, homeowners older than 65 will be able to make a non-concessional contribution of up to $300,000 ($600,000 for a couple) to super funds from the sale of their principal home held for a minimum of 10 years.

The upshot: incentives to downsize aim to help boost available housing stock for families/younger generations.

Have a read of this article on Domain for an easy to understand overview.

  • Social housing investors

From 1 January 2018, the Government will provide an additional 10 per cent Capital Gains Tax (CGT) discount (60 per cent up from 50 per cent) to resident individuals investing in qualifying affordable housing (e.g. housing that is provided at below market rent and made available for eligible tenants on low to moderate incomes, is managed through a registered community housing provider and held as affordable housing for a minimum period of three years).

The upshot: the use of tax benefits to lure property investors will create more affordable housing for low to moderate income earners.

This AFR article outlines the tax breaks for social housing investors.

The losers

  • Foreign property investors

A 50 per cent cap on foreign ownership in new developments (multi-storey and have at least 50 dwellings) will be implemented.

A vacant property penalty will apply to foreign-owned properties that are not occupied or available for lease at least six months in each year.

There will be a tightening of Capital Gains Tax (CGT) rules with foreign and temporary tax residents unable to claim the CGT exemption for properties bought after Budget night, with existing properties grandfathered until 2019-20. The Government will also bolster the foreign resident CGT withholding regime by increasing the withholding rate from 10 per cent to 12.5 per cent, as well as increasing the number of foreign residents caught by the regime by reducing the threshold from $2 million to $750,000.

The upshot: restricting foreign investors from buying Australian property aims to take some of the heat out of the property market to hopefully increase housing stock for younger generations.

Read more about the impact on foreign property investors in this article from Finder.com.au.

  • Resident property investors

From 1 July 2017, travel expenses between properties will be disallowed for those who negatively gear property. In addition, new limits will be set for plant and equipment depreciation deductions to only those expenses directly incurred by investors.

The upshot: removing benefits that were suspected to be more for personal gain than for investment purposes is a small way to make property investment less attractive while also adding revenue to the country’s coffers.

Business Insider Australia outlines the measures put down in the Budget for property investors.

If you’re interested to see all the main measures outlined in the Budget take a look at these articles and analysis that provide a great overview:

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