If you’re a property owner, investor or looking to get into the market The Rentvesting Podcast will help cut through the hype, look at the facts and draw on decades of experience to help you make smarter property decisions.
May 10, 2017
On this week's episode of the Rentvesting Podcast, we're talking about the budget that's just been released. We're looking at the impact it has on property and how it will influence the wider market. Especially around the Commonwealth releasing more land and helping the supply side.
Every year, the treasurer announces what the budget will be - that is, just the changes to the overall budget. A lot of what has been announced though may not ever actually go ahead, but it's the measures that the government look at, understanding what they're going to be saving on and spending on.
This year is quite an exciting budget if you're in property or investment.
The whole point of the budget is to help get us out of debt and help the economy. There's a lot of assumptions that the government put around the budget, like the inflation target.
We spoke about the superannuation system in this episode, and this is the flow on effect. This is the way to use your super as a vehicle to save money and use it towards your deposit. You can do salary sacrifice, which funds into super and saves to a home deposit.
Concessional / pretax
The concessional option you don't pay tax on, so if your base salary is $80k + super you can ask your employer to pay you $10k less (salary sacrifice) and then you only pay tax on the $70k and the other $10k goes towards your super.
On that $10k you would receive in hand $6,550 if you're still earning $80k but if you put it into super it would be $8,500 int your account. Beware though, if you withdraw it you can pay marginal tax rate but there's a 30% offset.
The only catch is, where is your super and where is it invested.
Volatility! If you've invested your super into a high growth, aggressive manner and you're looking to buy a property within 2 -3 years, it's not a good idea to have it in volatile assets. If anyone wants to do this, make sure you're putting this allocation into conservative investments for the short term because you will get an aggressive loss if you do.
Disclaimer: Please seek individual advice.
This one isn't so good for property investors, under new rules, depreciation deductions will only be allowed if investors bought the items themselves. The change will apply to any items purchased after budget night.
How does this affect Rentvestors?
Unless you have the invoice or receipt, you won't be able to claim depreciation.
Claiming negative gearing benefits on interstate properties for inspecting or collecting rent will no longer be allowed.
If a foreign investor has bought a property here and kept it vacant, it's called a ghost house. Now, if it's kept vacant for 6 months or more it will be taxed. It will be at least $5k per annum charge for this, however, information is still limited around this.
Ghost houses can be identified by whether water or electricity has been connected or even just darkness in the evening in certain areas, making you say, where is everyone!?
How does this affect Rentvestors?
This will be good for areas in Sydney and Melbourne which will assist with supply and demand.
This one is good! The government wants to spend money on growing and improving infrastructure.
If you're over 65 and sell your home to downsize and move into a smaller place, you can put $300k each into superannuation as a post-tax contribution. Usually, after 65 and you're not working you can't put funds into your super, but with this change, you can.
It's going to free up housing stock, due to people being incentivised to downsize which helps to keep the market moving.
Increased concession for capital gains tax.
NRAFs - affordability to help people rent properties. If you currently own an investment property, and if it's an affordability housing scheme you can have an additional 10% discount off capital gains tax.
The government has proposed a tax on bank liabilities. This will contribute up to $6 billion over 4 years. This is almost 0.6% which will add to commercial and development loans. This will only affect the big five banks, and unfortunately, this will most likely get passed through to consumers.
Fixed rates are worth considering, due to rate changes forecasted.
The benefit is, that this will enhance competition because it helps the smaller banks to catch up to the bigger ones.
Currently, it is 2% of assessable taxable income but the threshold will go up and the medicare levy overall will go up by 0.5%.
Not massive, but still an additional tax.
Thank you for listening, we've had some really great reviews lately!