Property and the 2017 Federal Budget
May 10, 2017
If you invest in residential property…
and are a foreign resident
. . . where the property is not occupied or genuinely available on the rental market for at least six months per year, you will be charged an annual ‘penalty’ of at least $5,000. The new charge applies to applications to acquire property from 7:30pm Budget night.
. . . you may find yourself barred from buying into a new development, as the Government will introduce a 50% cap on foreign ownership in such developments.
Unfortunately for Foreign Property Investors, despite many recent additional taxes the 2017 budget contains further levies. Tax and duty advice should always be obtained before entering into any property transaction.
and incur travel expenses related to inspecting, maintaining or collecting rent for the property
. . . from 1 July 2017 you will no longer be able to claim deductions for those expenses. The cost of engaging a real estate agent for property management services will remain deductible.
TFG Tip: Jump online and book a trip before end of June for the last chance to claim the percentage of the trip that relates to inspecting your investment property.
that qualifies as ‘affordable housing’
. . . on or after 1 January 2018 you will benefit from a higher CGT discount – 60% instead of 50%. To qualify for the higher discount, housing must be provided to low to moderate income tenants, with rent charged at a discount below the private rental market rate. The affordable housing must be managed through a registered community housing provider and the investment held for a minimum period of three years.
. . . you will be able to access concessional tax treatment by investing in a Managed Investment Trust that itself invests in affordable housing, provided the affordable housing is available for rent for at least ten years.
We expect these measures to be taken up by Institutional investors more so than individuals.
that contains plant and equipment
. . . you will not be able to claim depreciation deductions for assets purchased after 9 May 2017 by a previous owner of the property.
TFG Tip: Depreciation can still be claimed on any new assets purchased for the property and the remaining Capital Works write off can continue to be claimed by a new owner.
that is newly constructed or a new subdivision
. . . on or after 1 July 2018 you will be required to remit GST on the purchase directly to the ATO as part of settlement, as opposed to the developer being required to remit the GST as is currently the case.
Under current rules the purchaser pays the GST to the Developer and then the Developer pays it onto the ATO. Some developers are failing to pass the money on and then liquidating.
This government law change will see the ATO placed ahead of other creditors. Tradesmen and Suppliers whom previously were paid before the tax man are likely to wear more of the loss on unsuccessful Property Developments.
Developers will also need to ensure record keeping is up to date to allow the GST calculations to be made to ensure settlements proceed as planned.
This document contains general advice only and is prepared without taking into account your particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should speak to a licensed financial advisor who should assess its relevance to your individual circumstances. While The Field Group believes the information is accurate, no warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided in this bulletin is not considered financial product advice for the purposes of the corporations Act 2001.