With the recent delivery of Treasurer Scott Morrison’s 2017–2018 federal budget, many Australian homeowners, first homebuyers and property investors are wondering what it will mean for them and their properties.
We’ve broken it down so you know what’s what.
The new budget focuses on policies that aim to improve housing affordability, by addressing issues that have pushed housing prices into the realm of ‘unaffordability’ in the first place. These policies are likely to affect property buyers, landlords, developers and investors alike, but what changes can you expect? They include:
Changes to depreciation claims
The new budget introduces changes to plant and equipment depreciation, by limiting certain claims that can be made by investors. In essence, investors are not able to claim depreciation on items within the property like ovens, blinds, dishwashers, hot water systems etc, unless the investor has purchased the items directly. These changes don’t apply if the property is for commercial, industrial or otherwise non-residential use, or if the property was purchased (contract date) before 9 May 2017.
This is potentially good news for the rental market, as it may act as an incentive for current owners to upgrade their properties in order to gain depreciation benefits.
Changes to travel expense claims
Travel costs can no longer be claimed as property investment expenses. According to Tim Lawless, Director of Research at Corelogic, this policy change is “likely a response to a perception that some investors are claiming travel expenses that may be more related to personal usage rather than legitimate expenses related to their investment.” These changes are more likely to impact landlords who own property in remote areas.
Changes to foreign ownership
The budget has introduced even more changes for foreign owners, by implementing a levy for those investors who leave their property vacant for a minimum of six months a year. This levy equals at least $5,000 per annum, and has been proposed to ensure foreign property investors are contributing to Australia’s housing supply by purchasing with intent to occupy or lease their property.
A 50 percent limit to foreign ownership has also been introduced, which aims to decrease the competitive advantages that foreign investors have over local buyers. With developers now unable to sell more than half a development to foreign buyers, the government’s hopes that it will level the playing field for Australian buyers who don’t have as much access to funds as our foreign counterparts. Andrew Hogan, Director of Point Polaris, suggests that this may have the opposite effect, warning that it may “further constrict supply to rental markets, thus driving rental and housing prices further out of reach of local first home owners and owner occupiers.”
Changes for first homebuyers
A new scheme called the First Home Super Savers Scheme has been introduced. It aims to give first homebuyers a leg up by allowing them to withdraw voluntary contributions made to their superannuation after 1 July 2017, for use towards a first home deposit. A voluntary contribution might include non-concessional and concessional personal contributions, or salary sacrifice contributions. First homebuyers can add an additional $15,000 each tax year to their deposit, but it’s capped at $30,000.
Ready to get into your first or next home? Learn how to stretch your money further by buying before end of financial year here.