7 September 2017
Media Release - #2017011, 2017

Targeted tax measures to improve housing affordability

Joint media release with
The Hon Scott Morrison MP
Treasurer of the Commonwealth of Australia

The Turnbull Government is moving forward on the housing affordability package announced in the Budget.

Legislation introduced into the Parliament today will:

  • enable prospective first home buyers to save for a deposit inside superannuation through the First Home Super Saver Scheme (FHSSS)
  • allow older Australians to contribute the proceeds of the sale of their family home to superannuation
  • better target deductions relating to residential investment properties
  • and boost the availability of rental accommodation in the market
     

First Home Super Saver Scheme

The FHSSS legislation will enable prospective first home buyers to save for a deposit inside their superannuation account. This will be a game changer for young Australians trying to get their first place.

Individuals can contribute up to $30,000 (up to $15,000 a year within existing caps) into superannuation and will be able to withdraw the contributions from 1 July 2018. These contributions, along with deemed earnings, can be withdrawn for a deposit with withdrawals taxed at a marginal tax rate less a 30 per cent offset.

For most people, the FHSSS will enable them to boost the savings they can put towards a deposit by 30 per cent compared with saving through a standard deposit account. This will give prospective first home buyers a significant step up at a time when saving for a deposit is becoming increasingly difficult for many people.

Downsizing

The downsizing measure will allow older Australians to contribute proceeds from the sale of their family home into their superannuation accounts. Many older Australians will be attracted to take up this concession and in so doing vacate larger properties which no longer suit their needs.

From 1 July 2018, people aged over 65 will be able to make an additional non-concessional contribution of up to $300,000 into superannuation when they sell their home which they’ve held for at least ten years. Both members of a couple can take advantage of this measure, meaning up to $600,000 of contributions may be made by a couple from the proceeds of selling their home.

This will encourage people, who may have been put off by existing restrictions and caps, to move house and free up larger homes for growing families.

Protecting Negative Gearing

The Government’s housing integrity measure will restore integrity to the tax treatment of residential investment properties. The Government will disallow claims for travel expense deductions and limit plant and equipment depreciation deductions to new assets only.

From 1 July 2017, travel costs for individual investors inspecting and maintaining residential investment properties will no longer be deductible. This will improve the integrity of the tax system by preventing residential property investors from taking holidays at the taxpayers’ expense.

By limiting plant and equipment depreciation deductions the Government is cracking down on investment property abuse by removing the existing opportunities for capital items to be depreciated by multiple owners in excess of their actual value.

These measures have been subject to extensive public consultation. The Government has responded to stakeholders’ feedback by enabling investors to claim plant and equipment depreciation deductions in situations where a developer/renovator tenants a property prior to selling it to an investor, provided the property is:

  1. Purchased by an investor within six months of the property being completed by a developer/renovator; and
  2. The developer/renovator has not claimed depreciation deductions.

Together, the travel and plant and equipment deduction changes will improve the integrity of the tax system and are estimated to generate $800 million in revenue over the forward estimates.

Vacancy Levy

The Government’s foreign resident vacancy levy and will implement an annual vacancy charge on foreign owners of residential real estate where property is not occupied or genuinely available on the rental market for at least six months in a 12 month period.

The vacancy charge builds on the Government’s existing foreign investment regime to increase the number of houses available to live in. The charge provides a financial incentive for the foreign owner to make their property available on the rental market.

The vacancy charge applies to foreign persons who make a foreign investment application for residential property from 7:30PM (AEST) on 9 May 2017.

The Australia Taxation Office, responsible for residential real estate applications under the foreign investment framework, will administer the vacancy charge.

Through the comprehensive housing affordability package announced in the Budget, the Government is radically improving outcomes across the entire housing spectrum, from first home buyers, to renters, to downsizers, to those in community and affordable housing, and those suffering homelessness. This is getting on with it.