As part of the 2017-18 Federal Budget, the Government announced several measures to assist with housing affordability. Bills to implement some of these measures were introduced on 7 September 2017. The Bills are:

First home super saver scheme

Broadly, the scheme allows individuals to withdraw up to $30,000 of ‘voluntary’ superannuation contributions made since 1 July 2017. If the withdrawal is used for the intended purpose of buying or constructing their first home, then a tax break of up to approximately $5,000 is provided through lower combined tax on the contribution and withdrawal compared to salary saved outside superannuation.

Please refer to our previous Riposte that was based on the exposure draft.

We note the Bills clarify that:

  • individuals who already hold/held freehold, a corporate title interest or lease with a 50+ year duration over land in Australia are disqualified from the scheme, even if the land concerned was not residential land; and
  • contributions required under superannuation fund rules and Government plans that are in excess of mandated Superannuation Guarantee do not count towards the scheme.

Downsizer superannuation contributions

Broadly, after 1 July 2018, the scheme allows individuals aged 65+ who have owned their home for more than 10 years to contribute up to $300,000 of the proceeds of the sale into their superannuation. Both members of a couple can contribute up to the $300,000 limit each.

Please refer to the ‘Superannuation’ heading of our Tax Brief on the 2017-18 Federal Budget for further details .

The Bills refine the 10 year requirement by counting:

  • the period that any of the individual, their spouse or their former spouse owned the home; and
  • the combined period that the home and a former home were owned, if the former home was destroyed or compulsorily acquired by Government.

Residential landlord depreciation and travel expense deduction limitations

Residential landlords who are not conducting a business will be denied depreciation deductions for already used chattels and travel expense deductions related to their “residential premises” (this is a controversial term borrowed from the GST Act that has often been litigated), unless:

  • the landlord is (i) a company, (ii) a large superannuation fund, (iii) a managed investment trust, (iv) a public unit trust, or (v) a unit trust or partnership wholly owned by such entities; or
  • in the case of depreciation, the asset was purchased new by the landlord from the trading stock of a shop, or as part of the purchase of “new residential premises” (this is also a controversial term borrowed from the GST Act that has often been litigated) that were not previously tenanted (or already tenanted but purchased within the first 6-months of becoming new residential premises).

Depreciation for assets purchased before 9 May 2017 which were used in the property in 2016/17 are not affected by the Bills.

Please refer to our previous Riposte that was based on the exposure draft.

The earlier exposure draft limited the trust exception to widely held unit trusts with 300+ members, and did not provide a 6-month grace period for new residential premises.

Vacancy Fees

Foreign owners who acquire residential properties after 9 May 2017 may be liable for a vacancy fee each year unless, for 183 days or more in a vacancy year;

  • the owner (or a relative) occupies the dwelling;
  • the dwelling is subject to lease/s or licence/s with a minimum duration of 30 days; or
  • the dwelling is made genuinely available on the rental market, with minimum durations of 30 days.

A ‘vacancy year’ commences on the day of the owner’s initial right to occupy the dwelling. This is usually the date of settlement, or the date on the “certificate of fitness for occupancy” if it is a new property or a property that was subject to renovations.

Broadly, the vacancy fee amount is equal to the foreign investment application fee imposed on the property at the time of acquisition.

To determine if a vacancy fee is payable, the foreign person is required to lodge a vacancy fee return with the ATO within 30 days after the end of each vacancy year.