Tax treatments could shift the dial on affordable housing

Housing affordability measures announced in the May 2017 Federal Budget target both supply and demand. But there’s a lot to get your head around, says Moore Stephens’ director Simon Alford.

Some measures have already been implemented, Alford says.

These include increasing the capital gains tax (CGT) withholding rate for foreign tax residents to 12.5 per cent and the CGT withholding threshold for foreign tax residents to $750,000. Foreign ownership has also been restricted in new development to no more than 50 per cent.

The federal government has also introduced bills into Parliament implementing measures which are yet to be passed. Of these, the First Home Saver Super (FHSS) Scheme has attracted considerable attention.

“The FHSS Scheme allows people aged 18 or over to withdraw eligible voluntary superannuation contributions for a first home deposit,” Alford says.

“To be eligible to withdraw money from your super – up to a maximum of $30,000 – buyers must not have previously held either a freehold interest, a long-term lease, or a company title interest in real property in Australia.”

Another important measure currently making its way through Parliament is the special downsizer superannuation contribution.

“This means people aged over 65 will be able to use the proceeds from downsizing their home to make a superannuation contribution of up to $300,000 or $600,000 for a couple.

“This incentive may be especially helpful for those otherwise unable to make contributions due to the work test or where they have a superannuation balance over $1.6 million. It is a sizeable incentive to downsize,” Alford explains.

Other measures announced but yet to be introduced aim to boost the supply of affordable housing.

“From 1 January 2018, the general CGT discount will increase from 50 to 60 per cent for residents who invest in qualifying affordable housing,” Alford says.

“To qualify, 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 also be managed through a registered community housing provider and the investment held for a minimum period of three years.”

Managed Investment Trusts will be able to acquire, construct or redevelop property to hold for affordable housing.

“This provides an attractive avenue for foreign investment,” Alford concludes.