The Treasurer, Scott Morrison, handed down the 2017 – 2018 Federal Budget on Tuesday 9 May 2017 which set out the economic and financial outlook for Australia for the current financial year, the budget year and the following three financial years.
Included in the budget were several changes that have the aim to improve housing affordability and the Australian economy on a household level.
First home buyers in particular are modest winners in this year’s budget. Contributions to superannuation will be taxed at a lower rate to contribute to savings for a house deposit. First home buyers will be able to save up to $30,000 at a reduced tax rate, which will be of great benefit to those at an income able to service a mortgage, however barely cut the surface for those struggling to save for the deposit itself, as the $30,000 is barely one quarter of the typical 20% deposit in the current market. The new measure may also put pressure on housing prices by its boosted demand or “entry-level” homes. It seems that current home owners that are looking to sell may benefit most from this new scheme.
However, one of the other introductions to the budget may assume some of this added pressure. There will be new restrictions on foreign property owners, where only 50% of new developments may be sold to foreign investors. Furthermore, foreign investors who fail to occupy or lease their property for six months of the year will be charged a levy of $5,000 per annum. This is postulated to relieve some of the heat from house prices on the east coast and benefit first home buyers.
Capital gains tax and negative gearing remain largely untouched, while residents over the age of 65 will be encouraged to downsize their home by being able to make non-concessional contributions to their superannuation up to $300,000 as a result of the sale of their home.
While there are some wins towards housing affordability and first home buyers, to the majority of renters in Australia, the purchase of property remains largely out of reach.