What will the 2017 budget mean for property?
Scott Morrison has delivered his 2017 budget and there are a few changes that will affect Australian homeowners. Here are 6 changes you should be aware of
Baby boomers – it’s a good time to downsize.
From 1 July 2018, if you’re 65 years or over you’ll be able to make a non-concessional super contribution of up to $300,000 from the sale of your home, so long as you’ve lived there for at least 10 years (and it’s your primary residence).
Couples can take full advantage of the new contribution, which is in addition to current contribution rules and caps. You’ll also be exempt from the existing age test, work test and the $1.6 million balance test for making non-concessional contributions.
The new tax incentives also include a one-off exemption from stamp duty when purchasing a smaller property. This means you’ll get to keep the majority of the profit from selling and downsizing, and put it towards your retirement income.
Homeowners – expect higher interest rates.
Australia’s 5 biggest banks are threatening to pass on a new multi-billion dollar levy to homeowners. The new 0.06 per cent annual levy will apply to certain key funding sources to banks with liabilities above $100 billion – namely the Commonwealth Bank, Westpac, NAB, ANZ and Macquarie.
If banks do increase their interest rates, now might be a good time to consider switching to a fixed rate loan.
First homebuyers – save for a deposit faster!
If you’re a first homebuyer saving a deposit to buy a home, you’ll be able to use your super as a sort of supercharged savings account.Under the new budget, you can salary sacrifice up to a maximum of $30,000 or $15,000 per year from your pre-tax income over the compulsory superannuation contribution.
You can then withdraw that cash, along with any earnings, from July 1, 2018. By putting savings in your super, contributions will be taxed at just 15 per cent. And withdrawals will be taxed at 30 per cent below the marginal tax rate.
The goal behind this scheme is to help you accelerate your savings to gain faster entry into the property market.
Tighter tax incentives for investors.
If you own an investment property, forget claiming your travel related expenses. Due to widespread rorting of the system, tax deductions for travel expenses related to owning and renting an investment property will be a luxury of the past.
Rules around depreciation deductions for plant and equipment items such as washing machines and ceiling fans are also being tightened. From budget night, you’ll only be able to claim the deductions if you actually bought the item yourself.
Restrictions for foreign investors.
A new annual $5,000 levy will hit foreign investors who leave their investment property vacant for more than six months. And foreign investors won’t be able to claim primary residence exemption against capital gains tax. Under the new budget, there will hopefully be greater supply of properties available to locals, as developers can’t sell more than 50 per cent of their new property stock to foreign investors.
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