It’s a new financial year and as is usually the case come July 1, certain new legislations have come into effect.

We outline the changes that could affect you in terms of your real estate related decisions and actions below.

First Home Super Saver Scheme

Individuals can now make voluntary contributions of up to $15,000 per year and $30,000 in total, to their superannuation account to purchase a first home. These contributions, which are taxed at 15 per cent along with deemed earnings, can be withdrawn for a deposit on a first home from 1 July 2018. Withdrawals will be taxed at marginal tax rates less a 30 per cent offset.

For most people, the First Home Super Saver Scheme could boost the savings they can put towards a deposit by at least 30 per cent compared with saving through a standard deposit account. This is due to the concessional tax treatment and the higher rate of earnings often realised within superannuation.

Many employees will be able to take advantage of salary sacrifice arrangements to make pre-tax contributions.

LRBA (Limited Recourse Borrowing Arrangement) & Transfer Balance Caps

As at 1 July 2017, any loan taken out within an SMSF will be added back to a member’s balance for the purposes of the $1.6m Transfer Balance Cap.

Therefore a single member SMSF for example with $2m in assets and a $1m loan will still be considered to have a member balance of $2m for the purposes of the Transfer Balance Cap. Importantly this restricts a member under these conditions from being able to make non-concessional contributions to their SMSF where they would ordinarily have been allowed to if the net position of the member’s balance was considered.

The rationale behind this decision was to prevent those impacted by the $1.6m Transfer Balance Cap from using LRBA’s to reduce their member balances.

Negative Gearing

While negative gearing remains in place, certain rules have been tightened around what can be claimed; specifically travel expenses and depreciation deductions.

Under new rules, which came into effect on 1 July 2017, depreciation deductions for plant and equipment items such as washing machines and ceiling fans will only be allowed if the investor actually purchased those items.

Investors are also no longer eligible to claim tax deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property.

Residential Tenancies Act

Changes, which are said to deliver greater efficiencies and cost savings, include:

• A simplified process for when a lessor is required to issue a notice of proposed entry to the tenant.
• Notices and documents can now be issued electronically.
• Notices of abandoned goods no longer need to be advertised in a state-wide newspaper.

All sellers must now apply for a Clearance Certificate from the ATO when selling a property for $750k or more

The Foreign Residents Capital Gains Withholding regime changed on 1 July 2017.
The changes include:

• The threshold has been lowered from $2 million to $750,000.
• The withholding percentage has been raised from 10 per cent to 12.5 per cent.
• All sellers will now have to apply to the Australian Taxation Office (ATO) for a Clearance Certificate when the purchase price of their property is $750,000 or more.
• Where the buyer at settlement has not been given an ATO Clearance Certificate by the seller, the buyer must withhold 12.5 per cent of the purchase price and pay that amount to the ATO.