The government has made a number of announcements in the 2017 Federal budget that will affect property law. These include new initiatives to help with housing affordability and supply as follows:
First home buyers
The government is introducing the First Home Super Saver Scheme. From 1 July 2017, the Scheme will allow first home buyers to salary sacrifice into their superannuation fund. The tax advantages of doing so is intended to allow them to save for a house deposit.
The amount that can be contributed will be capped at $15,000 a year with a maximum contribution of $30,000 per person.
Both members of a couple will be able to take advantage of the initiative.
A first home buyer will be permitted to withdrawal from their super from 1 July 2018.
Foreign property owners
In an effort to increase the supply of rental properties, foreign property owners will be required to pay an extra charge of $5,000 or more for residential properties left vacant for at least six months each year. The vacant property tax will apply where the property is acquired from 9 May 2017.
Further, from 9 May 2017, foreign property owners will not be able to take advantage of the capital gains tax exemption when they sell their main residence. However properties purchased before 9 May will be grandfathered until 30 June 2019.
Additionally, the capital gains tax withholding rate that foreign tax residents must pay when selling their property, will be increased from 10 per cent to 12.5 per cent from 1 July 2017.
Further, from 1 July 2017, withholding tax will apply when a foreign property owner sells a property for $750,000 or more (currently the requirement to pay the tax is only triggered when the property is sold for $2 million or more).
Negative gearing for property investors will still remain. However property investors will no longer be able to claim tax deductions for travel related expenses incurred when visiting their properties.
Depreciation deductions for investors will also be tightened so that a subsequent owner of a property will no longer be able to claim deductions on plant and equipment purchased by the prior owners of the property.
In an effort to encourage older Australians to downsize and therefore increase the housing stock available for families, individuals over the age of 65 will be able to put up to $300,000 from the sale of their home into super (if they have lived in the home for at least a decade).
These initiatives will apply from 1 July 2018.
Developers will not be permitted to sell more than 50 per cent of properties in a new development to foreign buyers.