Targeted tax measures to help Australians make home purchases

Sydney Homes — Workers renovate a house in the Sydney suburb of Cammeray, Australia, August 3, 2015. Reuters/David Gray

The Turnbull government has taken a step further on the housing affordability package recently announced in the Budget. Legislation was introduced into the Parliament on Thursday.

The plan aims to increase the availability of rental accommodation and enable prospective first home buyers to save for a deposit inside superannuation with the First Home Super Saver Scheme (FHSSS). The legislation will allow older Aussies to chip in the proceeds of the sale of their family home to superannuation. It is also aimed at better targeting deductions related to residential investment properties.

First Home Super Saver Scheme

Under the FHSSS legislation, prospective first home buyers can save for a deposit inside their superannuation accounts. It would benefit Australians trying to secure their first home.

According to a media release, contributions of up to $30,000 (up to $15,000 a year within existing caps) will be allowed into superannuation. Individuals will be able to withdraw the contributions from July 2018.

Along with deemed earnings, these contributions can be withdrawn for a deposit, with withdrawals taxed at a marginal tax rate less a 30 percent offset. The FHSSS will also enable several people to boost the savings they can put towards a deposit by 30 percent. It will provide prospective first home buyers with an important step up at a time when saving for a deposit is becoming increasingly challenging for several people.

As for the downsizing measure, it will allow older Aussies to contribute proceeds from the sale of their family home into their superannuation accounts. It is expected that several people will be attracted to take up this concession.

Since July 2017, those aged over 65 can make an additional non-concessional contribution of up to $300,000 into superannuation when they sell their home, which they have held for at least ten years. Both members of the couple can be benefited, which means up to $600,000 of contributions may be made by a couple from the proceeds of selling their home.

The government’s housing measure is tipped to restore integrity to the tax treatment of residential investment properties. Claims for travel expense deductions will reportedly be disallowed, and plant and equipment depreciation deductions will be limited to new assets only. “By limiting plant and equipment depreciation deductions the Government is cracking down on investment property abuse by removing the existing opportunities for capital items to be depreciated by multiple owners in excess of their actual value,” a press release published at ministers.treasury.gov.au reads.