The Budget included many announcements which will impact the Property and Construction sector, including:
- Introducing legislation to enable Managed Investment Trusts (MIT) to invest in affordable housing;
- Increasing the Capital Gains Tax (CGT) discount for individuals investing in affordable housing from 50% to 60% (for further detail see our individual commentary);
- Reduction in the company tax rate to 27.5% from 1 July 2017 to businesses with a turnover of less than $25million;
- The Government reaffirmed access and extended the immediate asset write-off for small businesses with an aggregated turnover of less than $10million;
- Introducing a levy on businesses that employ foreign workers on certain skilled visas (for further detail see our corporate commentary);
- From 1 July 2018, purchasers of newly constructed residential properties (or new subdivisions) will be required to remit the GST directly to the Australian Tax Office (ATO) rather than paying this to the developer (for further detail see our commentary on GST and individuals).
Overall the Government is committing more than $70 billion to build transport infrastructure across Australia.
Part of this promise is a $10 billion National Rail Programme which will be established to provide improved railways for cities and regions.
In Western Australia, the Government is investing $1.6 billion in infrastructure which includes funding for better road access to the Fiona Stanley Hospital.
NEW SOUTH WALES
In New South Wales, an investment of $5.3 billion will be made to build a second international airport in Western Sydney.
From an industry perspective, Budget 2017–18 announced that it will work with State and Territory Governments to get more homes built and improve access to affordable housing for Australians.
A key measure to encourage investment into affordable housing will be changes made to allow MITs to invest in affordable residential housing. Currently MITs investing in residential property are not be eligible for the MIT concessional treatment. Under proposed provisions:
- Investors will receive concessional tax treatment through an MIT if the affordable housing is available for rent for at least 10 years;
- MITs will be able to acquire, construct or re-develop a property, however, the MIT must derive at least 80% of its assessable income from affordable housing;
- Qualifying housing must be provided to low or moderate income tenants at rental below the private rental market rate.
OTHER ANNOUNCEMENTS IN THE BUDGET THAT WILL HAVE AN IMPACT FOR THE PROPERTY AND CONSTRUCTION INDUSTRY INCLUDE:
- First home buyers will be able to salary sacrifice contributions into their superannuation to assist with saving for a deposit (for further details see our Superannuation commentary).
- Older Australians will be allowed to contribute downsizing proceeds into superannuation (for further details see our Superannuation commentary).
- A new National Housing and Homelessness Agreement will be introduced aiming to level the supply of housing and population growth. This agreement will set housing supply targets and facilitate more planning and zoning.
- The Government will focus on factors obstructing development and areas facing above average population growth.
- An online Commonwealth land registry will be established that will provide more detailed information about Commonwealth land to external parties in a mapped format. This will allow and encourage proposals for higher value land use and housing development.
- The Government also intends to release surplus Commonwealth land.
- Foreign owners of residential property may be liable to a charge where the property is not occupied or genuinely available for rent for at least six months per year (for further details see our Foreign Resident Housing Investment and Individuals commentary).
- Foreign and temporary tax residents will be denied access to the CGT main resident exemption (for further details see our Foreign Resident Housing Investment commentary).
- A 50% cap on pre-approved foreign ownership in new developments is being introduced (for further details see our Foreign Resident Housing Investment commentary).
- There will be no change to negative gearing as expected.
- Businesses within the industry with an aggregated turnover of less than $25 million will be eligible to a reduced corporate tax rate of 27.5% for the 2018 financial year.
- Businesses with an aggregated annual turnover of less than $10 million will continue to be eligible to an immediate asset write off for new or second hand assets costing less than $20,000 until 30 June 2018.
- Due to the abolishment of the 457 visas, businesses within the industry employing skilled foreign workers will be liable to pay an annual foreign worker levy.