Once again, the Budget has been delivered. Full credit to the Treasurer Scott Morrison for introducing a range of measures aimed at addressing housing affordability, in reality, those of us in the real estate industry with our ears to the ground probably won’t anticipate any of those measures will have much, if any, dramatic impact on the extraordinary strength we continue to experience across the residential property market in NSW.
No more tax deductions for travel expenses
You know that tax-deductible holiday you used to take to some exotic destination to check on your rental property? Sorry. That’s been scrapped. Weirdly enough, because people have been rorting the system… Go figure!
I will admit I am surprised at the projected estimated savings to come from the elimination of the tax deduction that was available for investors who travel to inspect investment properties. Again that might be a worthwhile government initiative, but I don’t expect it will be enough to dilute investment demand.
Tax depreciation gets it’s fat trimmed
As of Tuesday night you can no longer claim for plant and equipment items like dishwashers or above-ground pools unless the property is brand new or the property was purchased prior to Tuesday’s Budget.
On a $700,000 property this adds about $2,350 to your after-tax costs in the first year however that will diminish year on year.
65 and overs get Super privileges for selling the home
To make way for younger families, people aged 65 and over will be able to take up to $300,000 from the sale of their home and drop it into Super. This will effectively turn it into a tax-free deduction later on down the track. It’s called a “downsizer” contribution and will unlikely affect their other contributions.
This is a nice financial incentive for retirees to sell their family home but the reality is competition for property is high, so prices are going to remain strong.
First home buyers get to Super-charge their savings
From July 1, first home-buyers who contribute over and above their usual Super allowance (up to a max. of $30K) can then use those additional funds for a deposit. By using the 15% tax rate that is applied to Super savings FHB’s should get more bang for their buck by saving through this facility.
Foreign buyers get reigned in
Foreigners will now be slugged with capital gains tax when they sell their principal place of residence, not just on their investments. The government is also looking to restrict foreign ownership in a single property development to 50%.
The government also made mention of the need to supply more homes to help put a dampener on rising property prices. This will come in the release of further land allotments surrounding key metro areas and may even extend to a streamlining of planning regulations amongst local councils.
Yes there are new measures designed to limit overseas buyers accessing new developments but I think you will find any hole left by blocking international buyers will quickly be filled with unmet domestic demand. So values will be maintained.