The Federal Budget for 2017 was released last week and here is the Wise Monkey Property take on it! A large focus of this budget is the governments housing affordability package. The aim of the package is to combat the increasing housing prices and stimulate investment from both first home buyers and investors. The key areas that you need to know about for your investing journey are first home buyer incentives, infrastructure funding and Capital Gains Tax incentives.

First Home Buyers

First home buyers have been dealt an excellent hand with the First Home Super Saving Scheme. From the 1st of July 2017 you will be able to make contributions of up to $15,000 per year for two years into your superannuation. Which you can then draw on from the 1st of July 2018. With a tax rate of only 15% on contributions and tax at withdrawal of less than 30% offset, it can increase your savings by up to 30% over two years. With options to salary sacrifice and make personal contributions for those who are self-employed, the scheme is available to all prospective first home buyers.

National Housing Infrastructure Facility

This area of the budget will have huge positive impacts on investors. The framework of this scheme will see a contribution of $1 billion over 5 years into local infrastructure such as transport, power, water and site remediation. The establishment and improvement of this infrastructure is going to create new growth hot spots in existing markets. Local governments will have their plans assessed by the government from July 2018 to commence works. Getting into markets as early as possible, before the upgrade will be the key in taking full advantage of the benefits this scheme will provide.

Capital Gains Tax Incentives

Capital Gains Tax (CGT) has had concessions put in place to promote investors to provide affordable housing in markets. The incentives are a 10% CGT on properties deemed ‘affordable housing’. To qualify, houses need to be rented out at below market value rent for a period of three years from July 2018 to qualify for a 60% on CGT when sold. If you wish to rent at any stage above market value, your discount is calculated pro-rata for periods when your investment qualified. A valuable long term strategy that could make you significant returns upon sale. Preparing your investment portfolio now to take full advantage of this incentive.

Negative Gearing

Investors can breath a sigh of relief with the government making no changes to the negative gearing policies. This means that when combined with the CGT discount, there is a lot of opportunity to take full advantage of the new incentives. The only drawback is the removal of the ability to claim travel to inspect your investments.