There have been a number of recent tax changes that affect property investors and developers, with other changes still awaiting final legislation. We asked Amy Wark, HLB Mann Judd Melbourne to provided an overview.
Generally speaking, these measures are designed to encourage the availability of more affordable housing, to place some brakes on the attractiveness of property as an investment, and to help younger Australians enter the property market. Only time will tell whether these steps are successful. They include:
Generally speaking, the proposed changes for investors who own property directly are intended to limit the deductions that can be claimed from the investment, potentially ‘levelling the field’ compared to other forms of investment.
Therefore, the costs associated with travel to inspect rental properties are no longer deductible. In addition, depreciation claims have been restricted so that investors can no longer claim depreciation for plant and equipment that was purchased by a previous owner of the property.
To try and encourage investment in affordable housing, the government has proposed to increase the Capital Gains Tax (CGT) discount from 50 percent to 60 percent for investments in qualifying affordable housing. The investment must be managed by a registered community housing provider and held for a minimum of three years.
There were several proposed changes that impact foreign property investors. They includes removing the CGT main residence exemption for non-residents and temporary residents, with existing properties grandfathered until 30 June 2019.
The Government has also proposed to amend the CGT withholding tax rate for foreign residents, with the rate increased from 10% to 12.5% and the exemption threshold reduced from $2 million to $750,000.
This means that there will be a significant number of properties now subject to this withholding.
There is also a new annual foreign investment levy of at least $5,500 for foreign investors who do not occupy or lease their properties for at least six months in the year.
First home buyers and families
The Government has proposed measures that will assist first home buyers in saving for a deposit by allowing $15,000 per year up to a maximum of $30,000 under a Federal Government “super” saver scheme to be invested tax concessionally in superannuation and the funds can be later drawn for a home deposit.
At the other end of the spectrum, Australians aged 65 or over are able to put up to $300,000 from the sale proceeds of disposal of their primary residence into superannuation to incentivise downsizing as part of retirement.
For property developers who are selling new residential property there is now a requirement that they remit the GST to the ATO at the time of settlement rather than delaying this until they lodge the Business Activity Statement for the period, as was allowed in the past.
The Government has also imposed a restriction on the number of foreign buyers in new developments to 50 percent.