To tackle housing affordability, particularly for first home buyers, the Government included a range of measures in the 2017 Budget. A new measure focused on housing as well as the property industry in general.
One of the biggest changes was the introduction of a new ‘First Home Super Saver Scheme’. This scheme allows individuals to make voluntary contributions of up to a maximum of $30,000 to their superannuation account to buy their first home.
Here’s our wrap-up on wins and losses in the 2017 federal budget when it comes to housing and property.
2017 Budget for Housing: Losses
Restricting foreign ownership in new developments to a 50% cap
The 2017 Budget includes a new rule which restricts developers from selling every property in a new development to foreign buyers.
A maximum of 50% of the dwellings in a new development will sell to foreign investment and the remainder for Australian buyers.
Charging foreign owners who leave their residential properties vacant
To reduce the number of foreign investors who buy residential properties and leave them vacant, a new vacancy charge will apply if properties are not occupied or available to rent for at least 6 months in a year.
This measure is estimated to provide the government with over $20 million worth of revenue in the coming years.
2017 Budget for Housing: Wins
First Home Buyers
The First Home Super Saver Scheme will help first home buyers save a deposit through voluntary contributions into superannuation.
From 1 July 2017, you can make voluntarily contribute up to $15,000 per year and $30,000 in total to purchase a first home. This means you’ll be able to save for a deposit on your first home faster. (See below for an explanation how it works).
Retirees given $300,000 incentive to downsize
The 2017 Budget for housing included plans to encourage older people to downsize from homes which no longer meet their needs.
From 1 July 2018, people aged 65 and over will be able to make a non-concessional (post-tax) contribution into their superannuation of up to $300,000 from the sale of a principal residence (held for at least 10 years).
Restrictions on non-concessional contributions for people with balances above $1.6 million will not apply to contributions made under this special downsizing cap.
The aim of this measure is to increase the amount of housing stock available for young families. Another benefit is to boost the superannuation savings available to older people for a more comfortable lifestyle during retirement.
How does the First Home Super Saver work?
The First Home Super Saver Scheme is a new 2017 Budget for housing measure. It encourage Australians to build a deposit for a first home inside their superannuation.
From 1 July 2017, voluntary contributions of up to $15,000 per year and $30,000 can be made into your superannuation. You can then withdrawn again to use for purchasing a first home.
Contributions will only be taxed at 15% (as opposed to your standard income tax rate). Withdrawals from 1 July 2018 will be taxed at marginal rates less a 30% offset.
The First Home Super Saver Scheme boosts a prospective home buyers deposit by at least 30% in comparison to through a bank account. This is due to the concessional tax treatment and the higher rate of earnings available within superannuation.
This measure is estimated to have a $250 million cost to federal government revenue.
First Home Super Saver Example:
Sarah wants to buy her first home and earns $60,000 a year. Using salary sacrifice, she annually directs $10,000 of pre-tax income into her superannuation account. This increases her balance by $8,500 after the 15% contributions tax has been paid by her fund.
Over 3 years of saving $10,000 per year into her superannuation account, she is able to withdraw $27,380 of contributions.
Her $27,380 withdrawal is taxed at her marginal rate which includes the Medicare levy, less a 30% offset.
After paying $1,620 of withdrawal tax Sarah has $25,760 that she can use for her deposit.
Through the Scheme, Sarah saved approximately $6,240 more for a deposit than if she had only saved in a standard bank deposit account.
Sarah’s partner James also earns $60,000 a year and also salary sacrifices $10,000 annually to his superannuation during the 3 year period. Together, they have $51,520 to put towards a deposit.
This is approximately $12,480 more savings than if they had saved in a standard bank deposit account.
- First Home Super Saver Scheme – Australian Government Budget 2017-18
- Reducing barriers to downsizing – Australian Government Budget 2017-18
- Stronger rules for foreign investors owning Australian housing – Australian Government Budget 2017-18