What the Federal Government’s New Housing Affordability Plan Could Mean for You
As part of the 2017-18 budget, the federal government announced a new housing affordability plan designed to keep the dream of home ownership in reach of all Australians.
The plan includes a series of incentives targeted towards first-home buyers and downsizers over the age of 65 and also includes strong new rules for foreign investors. Here’s what the housing affordability plan could mean for you.
What does it mean for first-home buyers?
For those looking to purchase their first homes, the government has devised a new initiative to help buyer build their deposit – a pain point for many young Australians.
The First Home Super Saver Scheme (FHSSS) by allowing eligible buyers to withdraw voluntary contributions made to their superannuation fund (as well as the interest earned) to be used as a deposit for their first home.
The maximum contributions and amount that can be withdrawn is $15,000 per year or $30,000 for two years per individual. However, it is important to note that it is only voluntary contributions that can be withdrawn.
The mandatory 9.5% superannuation guarantee paid by an employer is not included in the scheme and cannot be used in the FHSSS.
What does it mean for older Australians?
Another issue the housing affordability plan aims to address is the barriers preventing older Australians from downsizing from their large family homes to smaller properties.
For many over 65, their properties are a lot bigger than they would like, but moving into a smaller property isn’t as simple as it once was – and given the increase in price on smaller properties, there isn’t the same financial incentive as in the past.
To encourage over 65s to sell their properties and thereby increase the supply available to younger families, the government will now allow downsizers to make a post-tax contribution of up to $300,000 to their super fund from the proceeds of selling their main residence, provided that they have lived in the home for at least 10 years.
What does it mean for foreign investors?
The third group likely to be affected by the new housing affordability plan is overseas investors. In order to discourage foreign investors from buying residential properties and leaving them vacant, those who own property within Australia but do not occupy them or rent them out for at least six months of the year will be charged an annual fee of $5,000.
As well as this, the government has introduced a 50 percent cap on pre-approved foreign ownership in new multi-storey housing projects with 50 apartments or more to provide Australians with a greater opportunity to invest in greater pool of homes to buy in these new developments.
Furthermore, the government is also bringing in reforms to reduce the avoidance of capital gains tax in Australia by foreign investors. Overseas investors will face a series of tougher rules and will see the capital gains tax withholding rate will increase from 10 percent to 12.5 and the threshold reduced from $2 million to $750,000.
Please note that this is general advice only. Speak to a trusted financial professional or more information specific to your individual circumstances.