The Government has announced additional measures to help first time home buyers in response to affordability issues in Australia’s housing market, particularly in big cities like Sydney and Melbourne.
According to a draft legislation that has been published, a First Home Super Saver Scheme (FHSSS) will be introduced to let first time homebuyers save for a deposit within their superannuation account, adding to it the tax incentives and earnings benefits of superannuation, and further boosting their capacity to save.
Those saving for a first home will receive direct assistance under FHSSS as they will be able to save in their superannuation accounts. They can contribute $30,000, as much as $15,000 annually within existing limits, and can withdraw the contributions plus the deemed earnings to help them save a deposit for their home.
Additionally, there will be a new law that would let retirees make an exempt non-concessional contribution to their superannuation when moving into a smaller home or into a retirement village.
The two legislations are planned to be introduced on 1 July 2018. Voluntary contributions coursed through FHSSS and made starting 1 July 2017 can be withdrawn, as long as all requirements are fulfilled beginning 1 July 2018. The law will become effective well ahead of the start date to provide guarantee to savers and sellers.
A draft legislation has also been published which prevents foreign residents investing in residential properties from claiming the primary residence exemption. Foreign tax residents will no longer be allowed to claim the primary residence capital gains tax (CGT) exemption when they sell their home in Australia which was started on Budget night this year.
If a foreign tax resident still owns property on Budget night, they can still claim the exemption until 30 June 2019. Under the new measure, the CGT principal asset to test for used on an associate inclusive basis will also be amended.
These changes will disassociate indirect interests in Australian real estate, thereby compelling foreign tax residents to pay their CGT liability. These are part of a package projected to contribute revenue of $600 million over the forward estimates.
The measures are part of the Government’s broad strategy for housing affordability published in the 2017-2018 Federal Budget intended to reduce the cost of living for Australians.
Many Australians are affected by the problem of housing affordability, which has no magic formula to solve it. The measures will enhance outcomes for Australians – from those who have no homes and those who rely on social housing, to first time homebuyers and retirees who are considering downsizing.
Who do you know that is affected? Perhaps we can help…….