Now that the dust has settled on the Federal Government’s latest national Budget, it’s important to understand what it means to you and your mortgage.
There is some good news – and if you’re preparing to purchase your first home, you might just be winning.
Treasurer Scott Morrison called the 2017-2018 Federal Budget honest” and one that – “does not pretend to do things with money we do not have”.
Whatever side of the political fence you sit on, though, cutting through the confusion to figure out what some of the basics are – and how they will impact you – is important.
Changes for First Home-Buyers
From July 1, 2017, all first home-buyers will have the ability to salary sacrifice a percentage of their wage into their chosen superannuation fund – and use it to help them save for a home deposit. By salary-sacrificing extra amounts of pre-tax income – up to $15,000 per year above the compulsory superannuation contribution (capped at a maximum of $30,000) – the initiative is designed to help pay towards their purchase of their new home.
On top of this change, additional contributions will be taxed at 15% and subject to the $25,000 combined annual limit for both pre-tax and employer contributions.
The flow-on of that news is that, from July 1, 2018, first home-buyers can then withdraw cash they have saved – as well as any earnings on that money. The tax rate for those withdrawals will be taxed at marginal tax rates less a 30% offset.
It’s a move that is designed to fast-track savings for first home-buyers and offer more effective savings strategies than the average bank account option.
How the 2017-2018 Budget Impacts On Property Investors
Despite all the talk about negative gearing in the past year, the topic was largely left off the Budget agenda, with no obvious changes to the investment policy. It was made clear, though, that some tax advantages previously given to property investors would have restrictions imposed.
Effective immediately was the news that all negatively-geared landlords would no longer be eligible for any tax deductions related to travel expenses associated with owning and renting out an investment property.
The rules around depreciation deductions for any plant and equipment items were also affected. Changes in the Budget mean that, from now on, property investors are only eligible to claim any deductions on plant and equipment items (including things such as ceiling fans and washing machines) that they actually bought.
For investors keen to explore the affordable housing market, a variety of tax incentives aim to reward them with various tax incentives and encourage more buyers into this lower-end of the real estate market. ‘Qualified affordable housing’ investors will benefit from a discount of 60% in Capital Gains Tax – something that could make a pleasing difference to that next investment decision.
To truly understand how the Federal Budget for 2017-2018 impacts you and your property investment decision, talking to a trusted accountant is always a great start. With the right information up your sleeve, it might be an ideal time to find the right loan to suit you and work out the best way to take advantage of tax savings, while they are on offer.
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