May 12, 2017
1. Changes to Foreign Resident Capital Gains Tax
Currently, the foreign resident capital gains withholding tax is 10.0 per cent of Australian real property valued at $2m or more.
From 1 July 2017, it is proposed that the foreign resident capital gains withholding tax rate will be increased from 10.0 per cent to 12.5 per cent. The threshold will also be reduced from $2m to $750,000 – casting a much wider net if one considers property values in Sydney, Brisbane and Melbourne in particular.
Vendors would need to apply for a Foreign Resident Capital Gains Withholding Tax Clearing Certificate from the Australian Tax Office for any property over $750,000. If a clearance certificate is not provided, the purchaser will be required to remit a payment equal to 12.5 per cent of the purchase price to the Australian Tax Office following settlement.
Source: Budget Paper No.2: Budget Measures 2017-18 – Part 1: Revenue Measures, Page 27
2. Contributing Proceeds of Downsizing to Superannuation
The Government proposes that a person aged 65 or over will be allowed to make a non-concessional superannuation contribution of up to $300,000 from the proceeds of selling their principal place of residence from 1 July 2018.
This measure will only apply if the property has been the principal place of residence for at least 10 years and is available to both members of a couple.
The contributions are in addition to those currently allowed under existing rules and caps, and are exempt from the age test, work test and the $1.6m balance test for non-concessional contributions.
Source: Budget Paper No.2: Budget Measures 2017-18 – Part 1: Revenue Measures, Page 28
3. First Home Super Saver Scheme
From 1 July 2017, it is proposed that an individual may make voluntary superannuation contributions of up to $15,000 per year and $30,000 in total (within existing caps), to be withdrawn for a first home deposit.
The individual will be able to withdraw these contributions together with their associated deemed earnings from 1 July 2018 to pay for a first home deposit. The withdrawals will be taxed at marginal rates less a 30 per cent offset.
This measure is available to both members of a couple and aims to provide an incentive for first home buyers to save for a first home deposit quicker.
Source: Budget Paper No.2: Budget Measures 2017-18 – Part 1: Revenue Measures, Page 30
4. Restricting foreign ownership in new developments
New Dwelling Exemption Certificates will now include conditions capping foreign ownership in new developments at 50 per cent. The cap will apply to all New Dwelling Exemption Certificates where the application was made from 7:30pm on 9 May 2017.
The New Dwelling Exemption Certificates are granted to property developers as a pre-approval allowing the sale of new dwellings in a specified development without the foreign purchaser seeking their own foreign investment approval. The current certificate does limit the amount of sales that may be made to foreign purchasers.
The measure aims to ensure that at least 50 per cent of developments are made available for Australians to purchase.
Source: Budget Paper No.2: Budget Measures 2017-18 – Part 1: Revenue Measures, Page 31
5. New Residential Properties – Purchasers to Remit GST
Under the current law, developers claiming GST credits on their construction costs are required to remit the GST to the Australian Tax Office.
Due to some developers failing to comply, it is proposed that purchasers of newly constructed residential properties or new subdivisions will be required to remit the GST directly to the ATO as part of settlement. This measure is to take effect from 1 July 2018 and aims to improve compliance.
Source: Budget Paper No.2: Budget Measures 2017-18 – Part 1: Revenue Measures, Page 38