New Government Plan to Reduce House Cost
For the majority of younger families in Australia, getting onto the property ladder has become more difficult, and the dream of owning their own home seems to be way out of reach.
Both middle class and working families are continually being priced out of the market, and the percentage of ownership rates for people between 25-34 has taken a major downward turn in the past few years from 60% to around 48%. This is forcing many young people to commit to a level of debt which a few decades ago was unimaginable.
With only 1 out of 7 purchases being made for first home buyers, it shows there has to be some radical change. The government is in the process of trying to level the playing field, where first home buyers are able to compete with investors.
From July 2017, the government is making a reform to capital tax discounts and negative gearing which it hopes can help put the Australian dream of being a homeowner back within reach of these middle class and working families.
Affordability of Housing Proposals
To make sure the tax system becomes fair and can help build new jobs and growth, the government are changing how both negative gearing and capital gains tax are calculated from July 1, 2017.
From July 1, 2017, negative gearing to new housing will not be limited, if you have investments which are made before this date, these will not be affected by the new rules and will be grandfathered.
This means you can still deduct any net rental losses against income earned as long as your losses come from any housing which has been newly constructed.
Capital Gains Tax
The capital gains discount on all assets which have been purchased from July 1, 2017, will be halved. For any assets, which are held for longer than 12 months the capital gains discount will be cut from 50 per cent to 25 per cent.
As with the negative gearing, any investments made before July 1, 2017, will be unaffected by these changes and will also be full grandfathered.
The government understands it has become more difficult for first home owners as they receive no tax breaks, yet they can receive subsidies if they go on to buy a second, third or fourth home. Most of which shows, the benefits are being gained by the wealthier portion of Australians rather than the people who are struggling to get on the property ladder.