Investor landscape remains positive following Federal Budget

Landlords can breathe a sigh of relief following the recent Federal Budget, as government initiatives designed to bring the housing market under control have fallen short of penalising property investors too heavily.

Despite ongoing discussion around the impact of investor activity on housing affordability in recent years, the government has chosen to make only minimal modifications to negative gearing and foreign investment policy.

First Home Buyers trying to crack into the market?

In an attempt to level the playing field, the government has thrown a lifeline to first homebuyers with the introduction of a First Home Super Saver Scheme. Similar to our current superannuation scheme, first homebuyers will now be able to make pre-tax contributions of up to $30,000 (capped at $15,000 a year) towards a deposit.

Retiree looking for a tax relief?

The government has also made downsizing a more attractive proposition, by allowing retirees to contribute up to $300,000 post-tax from the sale of their main residence (as long as they’ve lived in it for 10 years) into their superannuation fund.

Property Investors take note!

The Treasurer has announced tighter regulations around some aspects of property investment, with implications for existing owners, potential investors, and those buying from overseas. Here are the key changes to be aware of if you own, or are in the market for, an investment property.

Visiting your investment property could get more expensive, due to the removal of negative gearing concessions on travel. From immediate effect, investors may no longer claim travel expenses when they are going to view their property. This may not be too jarring for local landlords but, if you’re thinking of investing in regional property and plan to check in frequently, it could be something to consider.

Those investing in affordable housing will benefit from a reduction in capital gains tax to 60%, as well as additional income security with the government approving rent deductions directly from tenants’ welfare payments.

Is the depreciation party over?

Note quite – but, while investors may still claim for the depreciation of structural assets (as long as they have a depreciation schedule and the building was constructed after 17 September 1987) the government has amended the policy on plant and equipment assets. Investors exchanging on residential property from 9 May will no longer be eligible to claim for depreciation of these assets, such as household appliances, unless they were the original purchaser. Investors who purchased prior to 9 May, as well as those who invest in commercial or industrial property, will not be impacted by this change in policy.

Foreign Investment tightened

If you’re investing from overseas, there are greater restrictions around buying new build properties. Developers can now only sell 50% of new dwellings to overseas investors, with the rest reserved for the Australian market. Furthermore, foreign owners are no longer exempt from capital gains tax on their main residence. To ensure investors are making their property available to renters, foreign owners will be liable for a $5000 fee if their property remains uninhabited for 6 months or more.

Overall, the outlook for property investors remains positive, with the changes outlined in the Federal Budget designed to improve housing affordability and supply while maintaining momentum in the market.

To find out how these changes could impact your future investment plans, please give me a call on 0418 522 422.