Changes announced to help first time buyers in Australia
With affordability affecting housing markets in Australia, most notably in major cities such as Melbourne and Sydney, the Government has announced further measures to help buyers.
Draft legislation has been published which will help first time buyers, remove barriers that discourage retired people from downsizing and discourage foreigners from buying homes.
Under the plans a First Home Super Saver Scheme (FHSSS) will be launched to allow first time buyers to save for a deposit inside their superannuation account, attracting the tax incentives and earnings benefits of superannuation, and turbo-charging their ability to save.
Assistant Minister to the Treasurer, Michael Sukkar, said that the FHSSS will provide direct assistance to those saving for a first home by allowing them to save in their superannuation accounts.
Savers will be able to contribute $30,000, up to $15,000 a year within existing caps, and be able to withdraw the contributions along with deemed earnings in order to help fund a deposit on their first home.
In addition, legislation will be introduced to allow Australians aged over 65 to make an exempt contribution to their superannuation after downsizing their family home.
Sukkar said that the downsizing measure will help free up the stock of larger houses for young families, by allowing older Australians to sell their houses and contribute up to $300,000 of the proceeds into superannuation.
Existing voluntary contribution rules and restrictions would not apply to this special non–concessional contribution, and both members of a couple could take advantage of the measure, contributing up to $600,000 from the proceeds of selling their home.
The measure also would allow retirees to make an exempt non-concessional contribution to their superannuation when they acquire and move into a home that that better suits their needs such as in the rental market or relocate to an aged care facility.
Both measures are planned to begin on 01 July 2018. For the FHSSS, voluntary contributions made from 01 July 2017 will be eligible for withdrawal, provided all criteria are met from 01 July 2018. Legislation will be introduced well ahead of the commencement date to provide certainty to savers and sellers.
The Government also released draft legislation to stop foreign residents investing in residential real estate claiming the main residence exemption. It will stop foreign tax residents from claiming the main residence capital gains tax (CGT) exemption when they sell property in Australia from Budget night 2017.
Foreign tax residents who hold property on Budget night can continue to claim the exemption until 30 June 2019. The legislation will also modify the CGT principal asset to test to apply on an associate inclusive basis.
‘This will ensure that foreign tax residents cannot avoid a CGT liability by disaggregating indirect interests in Australian real property. These changes to foreign investors buying residential real estate are part of a package estimated to add $600 million in revenue over the forward estimates,’ Sukkar explained.
‘These important measures are part of the Government’s comprehensive approach to housing affordability announced in the 2017/2018 Federal Budget that aim lower the cost of living for Australians,’ he pointed out.
‘Housing affordability is a major issue affecting many Australians and there is no silver bullet. The Government’s comprehensive plan will improve outcomes across the housing spectrum from the homeless and those who depend on social housing, to first home buyers and older Australians looking to downsize,’ he concluded.