Housing affordability, rising house prices and high levels of home loan indebtedness are topics that have received much public comment in the media.
In the 2017–18 Budget, the Government announced the “Reducing Pressure on Housing Affordability – first home super saver scheme. There are currently four bills before the Federal Parliament to implement tax measures to implement the scheme and to tighten foreign investor rules to address housing affordability.
First Home Super Saver Scheme
On 1 July 2017 the First Home Super Saver Scheme (FHSSS) was established to assist first home buyers to save for a deposit inside superannuation.
Individuals are able to make voluntary contributions either through personal contributions or through salary sacrificing arrangements into their superannuation and to withdraw those contributions for the purposes of purchasing their first home.
There is a cap on the contributions that individuals can make. This is to ensure that individuals do not contribute more into their superannuation than they would otherwise have done.
From 1 July 2017, home buyers can contribute up to $15,000 per year and $30,000 in total. Contributions and withdrawals will take advantage of the concessional tax treatment available under super.
The scheme will be administered by the ATO. Contributions can be withdrawn from 1 July 2018.
Individuals will need to meet an eligibility criteria and certain conditions. These include entering into a contract to purchase or construct a residential home within 12 months of the first release under the FHSS scheme and to occupy the premises for at least six of the first 12 months.
If individuals are unable to meet the conditions, released amounts can be recontributed back to super.
First Home Super Tax 2017 Bill
Individuals are required to pay a tax if they do not enter into a contract to purchase or construct their first home or recontribute the requirement amount into superannuation.
This is to ensure that individuals do not obtain a benefit from accessing the FHSS Scheme.
Downsizing contributions into superannuation
Individuals over the age of 65 years will be able to contribute the proceeds of the sale of their family home up to $300,000 into their superannuation on or after 1 July 2018.
The measure is aimed at encouraging older people to downsize from large family homes and to relocate to housing that is more suitable for their needs. Older people will be able to invest the proceeds of selling a home into their superannuation which in turn will help to free up housing stock for young growing families.
Ensure Australian homes are available to Australians–changes to foreign investor rules
The Federal Government is also implementing three measures to tighten rules for foreign investor.
These include measures:
- to reduce avoidance of capital gains tax by foreign residents with a 12.5% tax on sales of home of more than $750,000;
- placing a limit on foreign ownership in new developments by introducing a 50% cap; and
- implementing a charge on foreign owned residential property left vacant for more than six months in a year.
These measures are aimed at freeing up more housing stock.
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