On Tuesday the 9th of May 2017 federal Treasurer Scott Morrison handed down the government’s first budget since narrowly winning last year’s Australian election. For more than two years First Home Buyers Australia (FHBA) has been lobbying the government for policies to assist first home buyers compete with investors and enter the property market. We take a look at what was announced on budget night in relation to housing affordability.
Housing affordability measures announced
There were multiple housing affordability measures announced by Morrison on Tuesday evening from Parliament House:
- Increased affordable housing to be achieved through a range of housing supply polices including new commonwealth land releases and tax incentives for property investors to develop more affordable housing;
- Foreign investors restricted to only owning up to 50% of any given property development (e.g. half the units in a new apartment complex);
- Foreign investors taxed if they leave an Australian property vacant for more than 6 months;
- Slight tightening of property deductions claimed by investors (in particular, investors will no longer be able to claim travel costs in relation to visiting or inspecting investment properties).
However, the biggest talking point from the budget is the government’s plans (subject to passing legislation) to allow first home buyers to salary sacrifice a proportion of their pre-tax wages towards their home deposit. The proposal, called the ‘First Home Super Saver Scheme’ (or FHSSS), would provide first home buyers with tax concessions and potential greater investment returns, thereby boosting first home buyer deposits by approximately 30% according to the government (depending on circumstances and amount salary sacrificed). Here’s how the FHSSS would work:
- From 1 July 2017, individuals will be able to make voluntary contributions of up to $15,000 per year and $30,000 in total, to their existing superannuation account to save for their first home deposit (so long as you don’t go over your superannuation concessional cap)
- These contributions will be taxed at 15% on entry into the superannuation fund (the same tax rate as your normal employer super contributions)
- Investment earnings will be taxed at 15% in the superannuation fund (the same tax rate as current superannuation investment earnings are taxed at when in accumulation phase)
- Withdrawals will be taxed at the account holders individual marginal tax rate, less a 30% tax offset
- Withdrawals will be allowed at anytime from 1 July 2018 (if you are an eligible first home buyer)
- The administration of eligibility will be run by the Australian Taxation Office (ATO)
- It will NOT be dependent on the type of property you buy (i.e. you may buy a new or existing dwelling)
Please note all the housing polices announced by Morrison on Tuesday night will be subject to being passed into law by Parliament. As Australia’s premier first home buyer orgnisation, we promise to keep you posted on updates to the FHSSS (and if it does become law, we will provide further info on the scheme and how you can access it).
The First Home Super Saver Scheme will help want-to-be home buyers save a deposit sooner
Who will benefit?
FHBA co-founder Daniel Cohen said that aspiring first home buyers earning more than $18,200 per year will be better off by using the FHSSS as they will be able to save a deposit faster thanks to the tax concessions (outlined above). “It will aid aspiring first home buyers get over the deposit hurdle”.
“Additionally, over the medium to long term first home buyers will also benefit as more affordable housing is built on the back of new housing supply programs outlined by the Turnbull government”.
However, unfortunately if you have already saved your deposit and are planning on house hunting this weekend, none of the measures announced will assist you Daniel said.
Will the policies go far enough in helping first home buyers?
While FHBA is pleased to see that the Turnbull government will assist Australians save a deposit more tax effectively (and quicker), as well as new measures to increase affordable housing supply, we are extremely disappointed that there was barely any cuts or reductions to investor tax incentives such as negative gearing and the Capital Gains Tax (CGT) discount.
“Local investor activity is currently at all time highs. Unless there are some tighter controls to investor lending or decreases to generous investor tax incentives, investors will continue to buy up the housing supply and dominate the property market” said fellow FHBA co-founder Taj Singh. “The Turnbull government cannot ignore this problem if it’s serious about addressing housing affordability’.
Four days ago Senator Sam Dastyari posted this comedian styled video explaining why negative gearing needs to be looked at. Hear hear Sam.
Its another morning of auctions in Sydney… pic.twitter.com/EiV3pvp9sP
— Sam Dastyari (@samdastyari) May 6, 2017
The government has released an online estimator so you can see how the “First Home Super Saver Scheme” could benefit you. Try the FHSSS estimator online here
First Home Buyers Australia