Scott Morrison’s delivered his 2017-2018 federal budget. With this recent development, first time buyers of property and investors alike, are wondering what it might mean for their properties. Let’s take a look at a breakdown of this most recent budget.
The new budget focuses on a number of policies which aim to improve housing affordability. It does this by addressing the issues which have forced housing prices up into the unaffordable range. Such changes of policy will likely affect property buyers, landlords, developers and investors alike – so here are the changes you can expect to see soon.
Changing depreciation claims
This shiny new budget introduces changes to plant and equipment depreciation. It does this by limiting certain claims that can be made by an investor. The long and short of it is that investors are no longer able to claim depreciation on items within a property. This includes essentials such as ovens, dishwashers, water systems etc. – unless the investor purchased them directly.
The changes to policy here will not apply if the property is for commercial, industrial or any other non-residential usage. This will also not apply if the contract date falls before 9th May 2017.
This is likely to be great news for the rental market, and may in fact act as an incentive for current owners to upgrade their properties in order to make good on those depreciation benefits.
Changing travel expense claims
The cost of travel can no longer be claimed as part of property investment expenses. Tim Lawless of Corelogic says that this policy change is most likely to be a response to the perception that investors might be claiming personal travel under the guise of business expenses.
Such changes are likely to affect landlords who own property in remote areas. If you’ve been sneaking around claiming expenses for taking your kids to rugby, think again because it’s potentially making life harder for those whose businesses rely on this kind of claim.
Changing foreign ownership
This budget has seen many changes to foreign property owners. A levy has been introduced for investors who leave the property vacant for a minimum of six months per year. The levy is set to at least $5,000 per year.
The new levy has been put forward to ensure foreign property investors are actually making a contribution to Australia’s housing, with the intent to occupy the property, and not milk it for a quick dollar.
There has also been a 50% limit introduced for foreign ownership. This aims to reduce the competitive advantages that foreign investors almost always have over local buyers. Now that developers are unable to sell over 50% of a development to a foreign investor, the government hopes it will even out the scene for Australian investors.
Mr. Hogan of Point Polaris suggested that this might actually have the opposite effect – suppressing the supply of property on the rental market. This would have the knock-on effect of higher rental prices, making rental property unaffordable for first time owners and owner occupiers.
Changing first time buyers
This budget sees the introduction of a scheme known as the First Home Super Savers Scheme. The program aims to give first time buyers a helping hand – allowing them to take out voluntary contributions in their superannuation after 1st July 2017. These withdrawals can only be put towards a first home deposit.
Voluntary contributions may include non-concessional and concessional contributions or salary sacrifice contributions. This would mean that a first time buyer can stick an extra $15,000 on top of their deposit each year – although it is capped at $30,000.