This article was updated in January 2018 to reflect changes in the law regarding the First Home Super Saver Scheme and downsizing contributions into superannuation.
On the night of the Federal Budget reading, May 9, 2017, Treasurer Scott Morrison described this year's Federal Budget as about "making the right choices to secure the better days ahead."
For many Australians housing has typically meant security, and a large focus of the Federal Budget was on increasing housing affordability for all Australians.
Key measures proposed in the Federal Budget:
- A First Home Super Savers Scheme
- Concessions for people over 65 downsizing their home
- Tougher rules on foreign investment in property.
First Home Super Savers Scheme
In December 2017, the Federal Government announced that from 1 July 2017 you can make voluntary concessional (before-tax) and non-concessional (after-tax) contributions into your super fund to save for your first home.
From 1 July 2018 you can then apply to release your contributions, along with associated earnings, to help you purchase your first home. You must be 18 years or over to apply for the release of these amounts.
On 9 May 2017, the Treasurer proposed that to help those looking to enter the property market, a superannuation-like scheme has been put forward to provide tax breaks when saving for a home deposit.
Under the proposed scheme, contributions and earnings would be taxed at a rate of 15% (as opposed to the marginal rates) and withdrawals would be taxed at the marginal rate less 30%. Contributions would be limited to $30,000 per person, and up to $15,000 could be contributed per year.
The Federal Government estimates that under this plan, most home savers would be able to increase their savings by at least 30%.
Concessions for people over 65 downsizing their home
On 9 May, the Treasurer proposed that as part of a move to free up property across the country, the Federal Budget also plans to allow those over the age of 65 to make non-concessional contributions of up to $300,000 into their superannuation fund from the sale of their principal home.
In December 2017, the Federal Government said that from 1 July 2018, the Federal Government will introduce the Contributing the proceeds of downsizing into superannuation (downsizing) measure. This measure is part of a package of reforms to reduce pressure on housing affordability in Australia.
This measure applies to the sale of your dwelling (your home), which was your main residence, where the exchange of contracts for the sale occurs on or after 1 July 2018.
If you are 65 years old or over and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.
See the ATO website for more details.
Tougher rules on foreign investment in property
A levy of $5000 on all future foreign investors who fail to occupy or lease their property for at least six months of the year is one of the proposals in the Federal Budget that aims to address the impact of foreign investment. The other is re-establishing the requirement that developers must not sell more than 50% of new developments to foreign investors.
Creating more opportunities
The Federal Budget outlined plans for a new National Housing Finance and Investment Corporation to be established 1 July 2018 to provide long-term, low-cost finance to support more affordable rental housing. Alongside this, the Federal Budget put forward plans to create a new suburb just 10 kilometres from the CBD in Melbourne by releasing Defence land at Maribyrnong, as well as constructing tens of thousands of new homes in western Sydney.
The Federal Government wants states and territories to deliver on housing supply targets and reform their planning systems. It plans to do this by replacing the National Affordable Housing Agreement with new agreements.
Other proposed measures to encourage affordable housing:
- Allowing Managed Investment Trusts to develop and own affordable housing
- Providing investors in affordable housing with greater income certainty by enabling direct deduction of welfare payments from tenants
- Increasing the capital gains tax discount to 60% for investment in affordable housing.
Keep in mind
Any changes outlined in the Federal Budget must be passed by both the House of Representatives, which is controlled by the government, and the Senate, where proposed expenditures are subject to examination within Senate estimates hearings. This means any proposed cuts or changes outlined above may not necessarily become law.