Yep, it’s that time of the year again – budget time!
We know that most of you aren’t THAT interested in the budget itself, but rather how it affects you, your job, your investments… basically, your life.
Housing affordability has been a key policy area in this year’s budget. Here’s how the 2017 federal budget will affect first home buyers, downsizers and investors.
First home buyers
We have some good news for first home buyers in Queensland! The government has finally listened and responded to the public outcry, proposing a new scheme to help you get onto the property ladder.
Buyers now have an option to contribute their income into a superannuation account to save up for that deposit you’ve desperately been scraping coins together for. Individuals can sacrifice up to $15,000 per year into this fund and $30,000 in total. These contributions are taxed at 15%, rather than at your marginal tax rate. After 1 July 2018, these contributions plus additional earnings can be withdrawn at your marginal tax rate less a 30% tax offset. If you’re buying with someone else, you’ll be happy to know that both you and your partner, family member or friend can take advantage of this and contribute a total of $60,000 from super. This incentive is estimated to allow first home buyers to save a house deposit about 30% faster. We do advise people to be aware that saving in a superannuation fund structure is not the same as a depositing money into the bank, so it’s important to consider the investment style of your house savings in super.
This to-be-introduced scheme comes in addition to existing incentives such as the Great Start Grant and the stamp duty concession. However, first home buyers should note that after June 30 this year, the Queensland government will reduce the incentive back to the original $15,000 grant, so if you’ve been saving and thinking of buying a brand-new property, now is absolutely the right time to do it! The stamp duty concession will remain unchanged.
If you’re eager to get into your first home, it’s important you chat to an expert who can help you set up your finances correctly. Red & Co’s finance advisor have years of experience getting clients the best finance solutions, often saving them thousands. Get in touch with a Red & Co advisor today by clicking here or call us on 1300 88 73 28.
Another major barrier to housing affordability has been the fact that baby boomers have been reluctant to let go of their old family homes for both financial and sentimental reasons. The problem here is that many couples with an ‘empty nest’ are letting unoccupied bedrooms go to waste and face increasingly costly maintenance expenses.
To combat this and boost affordability, the Government is offering downsizers over the age of 65 the option to make a non-concessional contribution of up to $300,000 from the proceeds of a property sale into superannuation. Once again, this is available to both individuals in a couple, granted that they have lived in the home for over 10 years. These contributions won’t count towards the existing contribution caps. In addition, this new incentive will be exempt from the age test, work test and $1.6 million balance test.
We anticipate that this policy will have two major positive effects:
- The increase in supply will soften out the market for family-sized homes and will allow up-sizers to more easily flock to more suitable homes; and
- Downsizers, retirees and pre-retirees can significantly boost their nest eggs.
If selling is on the cards for you, the first step is finding out what your home is worth. Get in touch with a sales agent at Red & Co for a free property appraisal by clicking here or calling 1300 88 73 28.
For property investors, the budget has an unexpectedly small impact. Notable policies include no longer being able to claim a tax deduction on travel to visit the property you own and owners cannot depreciate non-fixed items in/on the property that were purchased by a previous owner. Aside from these, there have been no major structural changes to negative gearing.
This does mean that the cost of holding investment property is slightly higher, but given the recent talk about dampening investment lending in Australia, we consider these policies quite conservative.
Another thing to note is the new Big Bank Levy, which affects the Big Four plus Macquarie Bank. We all know how good banks are at passing on costs to consumers, so it’s likely the cost of lending will continue to increase, particularly for investors as opposed to owner occupiers.
Given these changes, we advise chatting to a broker to see what options are available to decrease your borrowing costs and maximise your income. Click here or call 1300 88 73 28 to have an obligation free chat to one of our finance experts about refinancing or restructuring your debt.
These incentives as part of the federal budget of 2017 are bound to positively change Queensland’s property investment landscape. Now is a great time to chat to your property expert and take control of your financial future and take advantage of the government’s new incentive.