Effect of the Australian Federal Budget 2017
What effect will the Australian Federal Budget 2017 have on negative gearing and housing generally?
The budget has to get through parliament first but I don’t see any objection to the minor adjustments they have made to negative gearing.
Prior to the federal budget one could claim the cost of travel and accommodation to inspect their residential investment properties, but that is now disallowed. There might have been a pattern of people travelling to Brisbane to inspect their properties at the same time as State of Origin or other popular events, mixing business with pleasure. It does not preclude claiming the costs of a professional property inspection.
A large tax incentive of negative gearing is being able to depreciate the cost of plant and equipment. By plant and equipment they are referring to mechanical fixtures, or those that can be easily removed such as dishwashers and ceiling fans.
If you owned or entered a contract to buy prior to 9 May 2017 there is no effect. If after May 9, you can still claim depreciation, as before, however subsequent owners will be unable to claim deductions for plant and equipment purchased by a previous owner of that property, their claims limited to outlays actually income incurred by investors.
Will this affect my clients? No, as we do not buy and sell but buy and accumulate.
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Good ideas regarding housing
Generally the budget had some good ideas. In Australia we have many instances where the elderly are still living alone in the old family home but concerned about the effect on their pension/Super if they sold. But the federal budget has come up with a good incentive to sell and downsize.
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This is a win for retirees as it provides a significant incentive for older Australians to downsize and it will result in a greater supply of family homes to young family buyers.
If a couple downsized and put $600,000 into their Super, what would be the income tax ramifications and is it a good idea?
It is a good idea because it will also help older Australians fund their retirement long term as their Superannuation investments are taxed at a lower rate of 15%.
Isn’t there a limit on voluntary contributions?
This is the main change. The contribution that can be made from the sale of their homes will be exempt from the usual voluntary contribution rules. At last a little bit of progress for retirees with the Federal Budget 2017.
Steve Taylor
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At the helm of Steve Taylor & Partners, Steve Taylor has been delivering expert advice and product knowledge to clients for over 30 years. Steve Taylor & Partners provide individuals, couples and families with the right strategies to create wealth and change their lives with solid bricks and mortar.
DISCLAIMER
Steve Taylor & Partners blog is opinion and not advice. Readers should seek their own professional advice on the subject being discussed. The figures stated in this article were accurate at the time of publication. For up to date figures, please contact our office.
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