Homepage Chan & Naylor newsroom

Budget Review 2017: Budget Review 2017: First Home Super Savers Scheme and other changes

Announcement posted by Chan & Naylor 15 May 2017

In the 2017 Budget, renters and those waiting for subsidised housing get aid while older Australians are encouraged to downsize and property investors face stricter rules around capital gains tax and negative gearing.

Starting July 1st, savers can salary sacrifice extra contributions into their superannuation account above the compulsory contribution up to a maximum of $30,000 in total and $15,000 in a single year. Starting July 1st, 2018, they can withdraw that cash and any earnings made. Because of the new scheme, most first home savers can accelerate their savings by a minimum of 30%. However, some experts warn that it may simply increase demand and house prices.


The First Home Super Savers Scheme comes with the tax benefits of superannuation with contributions and earnings taxed at 15% and withdrawals taxed at 30% below the marginal rate. Savers can also just use their existing super account and put aside funds for their first home deposit.


Meanwhile, negative gearing remains but rules are tougher around depreciation deductions and travel expenses. Starting July 1st, depreciation deductions for plant and equipment items will be allowed only if the investor bought them. This measure aims to avoid tax write-offs by successive investors in excess of their actual value. Investors may no longer claim tax deductions for travel expenses related to inspecting, maintaining and collecting rent for a residential rental property as well. This is to avoid deductions based on incorrect apportioning costs or private travel.


The Government will extend the current instant asset write-off threshold of $20,000 for small business entities by 12 months until June 30th, 2018. SBEs can immediately deduct the cost of eligible depreciating assets bought for less than $20,000. It will also amend the small business capital gains tax concessions to deny eligibility for assets which are unrelated to the small business, including the 15-year exemption, the 50% reduction, the retirement exemption and the roll-over concession. Businesses that employ foreign workers on 186 and 187 skilled visas will be required to pay a levy that will provide revenue for a new Skilling Australians Fund.


Foreign investors, on the other hand, face a 50% cap on foreign investment approvals. CGT rules are also being tightened for them, who will no longer be able to access the main residence exemption. The new rule will be grandfathered for existing properties until June 30th, 2019. Other changes include an increased CGT withholding rate and reduced CGT withholding threshold. Foreign investors in residential real estate will also be subject to a ghost tax if they leave their properties empty or not available for rent for at least six months of the year.


People aged 65 and above can make non-concessional contributions to $300,000 from the sale of their principal residence into their superannuation, provided they have lived there for at least 10 years. The Government will also work with states and territories to reform planning and zoning laws and establish a $1 billion National Housing Infrastructure Facility to address undersupply. It will also standardise use of long-term leases and boost homelessness funding. The Government will offer tax incentives and a bond aggregator to provide cheaper and longer-term finance for the community housing sector.


For more information about property investment, superannuation and taxes in Australia, contact a Specialist to discuss your particular circumstances.


Disclaimer