First home buyers and older Australians will be able to use their superannuation to get tax breaks that the federal government hopes will make housing more affordable.
First home buyers will be able to make pre-tax super contributions of up to $15,000 per year and $30,000 in total that can later be withdrawn and used for a home deposit.
By going through superannuation the funds are taxed at only 15 per cent.
“For those who are trying to save to buy their first home, we will support them by providing a tax cut on their first home deposit savings,” Treasurer Scott Morrison said in his budget speech.
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That measure is likely to boost demand in the housing market and put further upward pressure on prices, something housing experts and economists have long warned against.
But Mr Morrison is optimistic demand will be balanced by new measures to boost supply and ease foreign investor demand.
In a bid to free up the supply of larger homes for young buyers, Australians aged 65 and over will be able to transfer up $300,000 from the sale of their home into their super, on top of any other contributions they’re eligible to make.
Defence land in Melbourne will be released, paving the way for a new suburb of up to 6,000 new homes, and the government will establish a land registry to detail other potential building sites.
The government will also further tighten the screws on foreign investors by cutting their access to the main residence capital gains tax exemption when they sell a property, and slapping a $5,000 levy on any who fail to occupy or lease their property for at least six months.
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A rule preventing developers from selling more than 50 per cent of new developments to foreign investors will also be reinstated.
The rules for local investors are also to be tweaked to end tax deductions for travel expenses and limit depreciation deductions on items such as dishwashers and ceiling fans for those who have negatively geared properties.
Mr Morrison avoided making any change to long-standing but controversial negative gearing rules, as expected.
“Whether you are saving to buy a home, spending a high proportion of your income on your rent, waiting for subsidised housing, or you’re homeless, this is an important issue to you,” Mr Morrison said.
“There’s no silver bullets to make housing more affordable. But by adopting a comprehensive approach, by working together, by understanding housing needs, we can make a difference.”
The package is also another boost the government’s bottom line – with the tax breaks to cost $280 million and the crackdown on investors and negative gearing reductions forecast to save about $1.4 billion.