Tax and legal advice

Double standard property legislation passes both houses

By Sasha Karen
‘Sledgehammer’ property legislation passes both houses

Legislation impacting on travel expenses and plant and equipment deprecation are one step away from coming into effect, yet are being labelled by one expert as a “knee-jerk reaction” that, when compared to other pieces of legislation, show an unfair bias against residential property.

The Turnbull government has passed both The Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017 through both houses of Parliament, only requiring royal assent from the governor general to come into effect.

These changes, should they get the green light from the governor general, remained mostly unchanged from their draft legislation, as mentioned previously for the plant and equipment reforms and foreign investor reforms.

As they stand, these bills, if turned into acts, will impact investors through the following legislation:

Under the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017:

  • Foreign investors will be hit with a fee starting from $5,500 for a property purchased for $1 million or less if their property has been occupied for less than 183 days in a year;
  • Will penalise those who fail to submit or keep records, with a fee of $52,500; and
  • Come into effect retroactively from 7.30pm, 9 May 2017.

Under The Treasury Laws Amendment (Housing Tax Integrity) Bill 2017:

  • Individual investors will be unable to claim travelling costs for deductions;
  • Only allow assets to be deducted for the first time they are installed or used in a residential property;
  • Come into effect retroactively from 1 July 2017.

In a joint statement by Treasurer Scott Morrison and Assistant Minister to the Treasurer Michael Sukkar, these changes will help housing affordability and private renters.

“The vacancy charge builds on the Turnbull government’s strengthened foreign investment regime to increase the number of houses available to live in,” the statement reads.

“The charge provides a financial incentive for the foreign owner to make their property available on the rental market, helping provide more homes for Australian families.”

In regards to the Housing Tax Integrity Bill, these measures are described as curbing investors who attempt to exploit the tax system.

“This [travel cost deductions reform] will improve the integrity of the tax system by preventing residential property investors from taking holidays at taxpayers’ expense,” the statement said.

“Limiting plant and equipment depreciation deductions will remove the existing opportunities for items to be depreciated by multiple owners in excess of their actual value.”

However, Tyron Hyde of Washington Brown, who spoke to Smart Property Investment previously on what the tax depreciation changes will mean for investors, said this was essentially a “knee-jerk reaction” to the housing affordability crisis, which to him, seems to be relegated to just Sydney and Melbourne. If left to its own devices, Mr Hyde believes the crisis would have sorted itself out.

“I think this was a bit of a knee-jerk reaction to the government having to be seen to be doing something to the really negative gearers in the world,” Mr Hyde said.

“In order to squash prices, I think the natural forces of the market would've been able to do that if they just waited a little bit; it's already coming back.

“They've also squashed it on many other ways on foreign investment, so I don't think this was such a necessary thing to do, and if they just waited a year or so, it would’ve occurred anyway.”

The decision to target residential property due to a broken system, Mr Hyde said, was an unfair decision when compared with other property investment categories.

What really gets me though is that the government's saying that the system was broken in a way that you treat second-hand plant and equipment items on property, Mr Hyde said.

But the government continue to lets you do that on commercial, industrial, every other [category], so the same system.

“If they're so worried about the system being broken, why would they let it occur for all those other transactions?

With the legislation now passed, Mr Hyde predicted the legislation may be a repeat of what occurred in 2004 with the government introducing a 2.25 per cent fee for the sale of property, which caused property owners to stop selling property. It was scrapped eight months later.

Mr Hyde can see these reforms lasting longer, by at least a few years.

If a lot of people that have bought properties two, three years ago in their super fund, and now [are] struggling to sell them, and there's a lot of people in the papers crying poor because of this change, then they may start to get a groundswell of supporters to why this is really not the smartest move ever.

 

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  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

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    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1201 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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