After weeks of speculation on its contents, the 2017 Federal Budget has been released. Our analysis summarises three important changes for first home buyers, investors, and property managers. From 1 July 2017 the following measures will take place:
1. First Home Super Saver Scheme
Individuals are able to make additional voluntary pre-tax contributions to their superannuation account. These additional contributions and any income from them are able to be withdrawn and used as a deposit for their first home. The additional contributions will attract the more favourable superannuation tax rate of 15% rather than the individual’s marginal tax rate.
A similar scheme was implemented pre-2010 where individuals were able to open a special First Home Saver account with select institutions. These accounts attracted high interest rates that were government backed. Ultimately, the scheme was scrapped due to low interest from young home buyers.
2. Negative Gearing
Rules around negative gearing have been tightened and now restrict depreciation deductions for plan and equipment items such as air con, fans, ovens, etc. Depreciation of these items will only be claimable if the investor actually bought them and not for existing chattels. It has not been clarified whether chattels bought with the property will be claimable as a percentage of the property’s cost.
Additionally, travel expenses relating to inspection, maintenance, and collection of rent will no longer be able to be claimed.
3. Ghost House Tax
An annual fee has been introduced to discourage foreign investors from purchasing residential property and leaving the property unoccupied. The annual fee will be charged if the property is not occupied or available to rent for at least six months in each year. The fee will be imposed by the ATO and it is unclear what collection methods will be used to enforce payment of the fee.