2017 Federal Budget: Who’s Happy? Who’s Not?

2017 Federal Budget: Who’s Happy? Who’s Not?

12 May 2017

Just about everyone, from primary school students to big broadcasters, will be touched by the 2017 budget. But how will it affect the property market?

First, the winners:

As reported in Domain, retirees over 65 when selling a home they have lived in for over 10 years can make a non-concessional contribution of up to $300,000 into their super fund from the sale. The goal is to provide an incentive for the baby boomer generation to sell larger homes and move into smaller dwellings. First Home Buyers Australia director Taj Singh said, “We feel that this policy will free up more supply.” ABC News reports that this is only expected to help up to 10,000 retirees a year.

First home buyers will be able to use voluntary contributions to their superannuation to save for a house deposit. Withdrawals will be taxed at a lower rate, but the amount that can be contributed is capped at $15,000 a year and $30,000 all up. Both members of a couple can take advantage of the scheme. Even so, some pundits are saying that in Sydney or Melbourne, it will only provide a small fraction of the deposit. Domain explains that “depending on the rate of earnings, $60,000 withdrawn between a couple would roughly pay for the stamp duty on a home priced at Sydney’s $1.15 million median house price.”

Sydney is getting a second airport at Badgerys Creek in the city’s west. Although this will ease pressure on the existing airport as it quickly runs out of capacity, there is local opposition to forced evictions from the area. The Federal Government will pour $5.3 billion into the project over the next 10 years. Completion is slated for 2026.

Farmers are finally getting an inland rail network to move their goods faster and cheaper. The Commonwealth-owned Australian Rail Track Corporation will receive $8.4 billion to deliver the 1,700 kilometre freight rail network between Melbourne and Brisbane. The project should start in the next financial year.

There’s also ongoing funding for the Landcare program. The Government has allocated it $1.1 billion, providing funding through to 2023.

Western Australia will get new roads and rail, as part of a state-Commonwealth funding package.

But not everyone is happy. Some of the losers:

The five biggest banks will be hit with a new 0.06 per cent levy from July 1. There is concern that this cost will simply be passed on to customers, although Malcolm Turnbull has advised that this would be ill-advised.

The Australian Financial Review explains that foreign investors will be hit with a charge on residential property which is not occupied or not genuinely available on the rental market for at least six months per year. The charge will be at least $5,000.

The budget also limits the extent of foreign ownership of new developments. The Treasurer Scott Morrison said, “We will restore the requirement that prevents developers from selling more than 50 per cent of new developments to foreign investors.”

Foreign property owners will lose their exemption from capital gains tax when selling their principle residence in Australia. The withholding rate on capital gains tax for foreigners will increase from 10% to 12.5%, and it will apply to properties selling for as little as $750,000.

The new restrictions on foreign property owners could take a little heat out of property prices in Sydney, Melbourne, and Brisbane, which would benefit first home buyers.