• UDIA National Federal Budget Response

    2017-05-10

    UDIA National Federal Budget Response

    UDIA Federal Budget 2017-18 Snapshot
    Federal Treasurer Scott Morrison released the government's 2017-18 Federal Budget last night. UDIA's National Division has prepared the following summary for urban development professionals across Australia.

    Click here to view UDIA's National Media Release.

    Key Figures
    • Budget Position: $29.4 billion deficit in 2017-18, projected to shift to a $7.4 billion surplus by 2020-21
    • GDP Growth: 2.75% in 2017-18, up from 1.75% in 2016-17
    • Dwelling Investment: 2.75% growth in 2017-18, up from 2.5% in 2016-17
    • Wage Price Index: 2.5% growth in 2017-18, up from 2% in 2016-17
    • Inflation: 2% in 2017-18, unchanged from 2016-17
    • Unemployment: 5.75% in 2017-18, unchanged from 2016-17
     
    Summary
    The 2017-18 Federal Budget has been shaped by the Government’s want to repair the Budget whilst maintaining spending on recurrent expenditure as well as investing in growth. Since the Global Financial Crisis the Government has been borrowing to meet recurrent expenditure (welfare, health and education). Forward estimates show that by 2018-19 the government will no longer be borrowing to pay for recurrent expenditure from 2018-19, with the Budget expected to return to surplus by 2020-21.
     
    The Government projects that the measures outlined in this Budget will provide for the underlying cash balance to improve from a deficit of 1.6% of GDP in 2017-18, to a projected surplus of 0.4%of GDP in 2020-21.
     
    The Government has committed to a housing affordability package unseen since the days of Menzies with measures in place to address all levels on the housing continuum.
     
    Key Savings
    • A levy on banks with liabilities over $100 billion with $6.2 billion to be raised over 4 years.
    • Targeting tax deductions for investment residential property along with changes to foreign investor rules to raise $1.4 billion over 4 years.
    • Focus on recouping welfare overpayments expected to return $4 billion to the Budget by 2021
    • Targeting tax avoidance by large public groups and multinationals to raise $4 billion in 2016-17 through to 2017-18
    • The Medicare levy will increase by 0.5% from 2% to 2.5% of taxable income to go directly towards funding the NDIS Savings Fund.

    Home Ownership
    The First Home Super Saver Scheme will allow first home buyers to build a concessionally taxed deposit inside superannuation. In order to free up larger existing homes for younger families, downsizing Australians will be able to contribute up to $300,000 from the sale proceeds of their home into superannuation as a non-concessional contribution.
     
    Supply
    To drive housing supply the Government will be working with their State and Local Government counterparts to set housing supply targets and facilitate planning and zoning reform. The Budget initiatives to achieve this are:
    • A National Housing and Homeless Agreement with State and Territory Governments. The Agreement will include $375.3 million of Commonwealth funding to help people who are homeless and those in need of crisis accommodation.
    • The Government has adopted UDIA’s recommendation in establishing a $1 billion National Housing Infrastructure Facility to fund deals with local governments to remove infrastructure blockages to unlock new housing in greenfield and infill sites.
    • The Government has adopted UDIA’s recommendation in making under-utilised and surplus Commonwealth land available for housing development. A 127-hectare site of surplus Defence land in Maribyrnong in Melbourne (less than 10 kilometres from the CBD) will be divested to be made available for housing (up to 6,000 new homes) with more sites to follow.

    Affordable Housing
    The Government has adopted UDIA’s recommendation to encourage private sector investment in affordable housing.
     
    The Government will do this by offering a 60% discount on capital gains if an investment property is held for a minimum of three years in aggregate and rented out at below market rent for tenants on low to moderate incomes and managed by a registered community housing provider. Managed Investment Trusts will be allowed to be set up to acquire, construct or redevelop property to hold as affordable housing to incentivise foreign and domestic investors to invest in affordable housing.
     
    A new National Housing Finance and Investment Corporation will be established on 1 July 2018 to provide long term, low cost finance to community housing providers for affordable housing projects. This is to incentivise large scale investors into the affordable rental sector.
    Direct deduction of rent from welfare payments of tenants in public and community housing providers to provide greater income certainty for investors.
     
    Foreign Investment
    An annual charge of $5,000 on foreign owners of residential real estate will be applied where the property is not occupied or genuinely available for rent for at least six months of the year. A 50% cap will be put in place on pre-sales to foreign buyers in new developments.
     
    Tax Concessions
    The Government will disallow deductions for travel expenses related to owning a residential investment property. The Government will also confine plant and equipment depreciation deductions for items that can be easily removed, such as carpets and dishwashers, only to those expenses actually incurred by investors.
     
    Rent to Buy
    The Government is keen to promote the rent to buy asset class and shared equity ownership schemes but further investigations are being carried out by the Government on barriers to introducing these and as such the Budget does not contain details.
     
    Infrastructure
    The Government is committing $75 billion to infrastructure from 2017-18 to 2026-27 for critical airport, road and rail infrastructure projects.
     
    A $10 billion National Rail Program will be established to fund priority regional and urban rail investments with the aim to decentralise the economy and grow regional Australia.
     
    An additional $8.4 billion goes to the Inland Rail project, a high-capacity freight link between Melbourne and Brisbane.
     
    Project highlights by State and Territory:
    Victoria
    • $1 billion for new and upgraded infrastructure. Victoria will receive $500 million in 2017-18 to build a better regional rail network with improvements on the Geelong Line, North East Line and Gippsland Line. A further $460 million is available for Victorian infrastructure projects, which will be negotiated between the Australian and Victorian governments.
    • The Government has maintained its $3 billion commitment to fund the East West Link conditional on the Victorian Government deciding to proceed with the project.
     
    New South Wales
    • Western Sydney Infrastructure Plan - $2.9 billion ($725 million in 2017-18)
    • Pacific Highway duplication - $5.6 billion ($710.1 million in 2017-18)
    • WestConnex - $1.5 billion plus a concessional loan of $2 billion to enable the new M5 section to be constructed parallel with the M4 extension ($720 million of the loan in 2017-18)
    • Western Sydney Airport - $5.3 billion over 10 years to develop and build the Western Sydney Airport
    • $2.19 billion from the Asset Recycling Initiative to be provided to New South Projects including Sydney Metro, Sydney’s Rail Future and Parramatta Light Rail

    Queensland
    • Bruce Highway upgrade - $6.7 billion ($552 million in 2017-18)
    • Gateway Upgrade North - $914.2 million ($267.5 million in 2017-18)
    • Warrego Highway - $508 million ($219 million in 2017-18)

    Western Australia
    • Road and rail package - $1.6 billion
    • METRONET projects - $792 million (subject to a positive assessment of business cases by Infrastructure Australia)

    South Australia
    • North-South Corridor – Darlington interchange - $496 million ($198.7 million in 2017-18)
    • North-South Corridor – Torrens Road to River Torrens - $400.5 million ($105 million in 2017-18)
    • North-South Corridor – Northern Connector - $708 million ($233.8 million in 2017-18)

    Tasmania
    • Midland Highway - $400 million ($96.5 million in 2017-18)

    Australian Capital Territory
    • Capital Metro - $67.1 million

    Northern Territory
    • Northern Territory Roads Package - $77 million ($15.7 million in 2017-18)
    • Regional Roads Productivity Package - $90 million ($15.1 million in 2017-18)
    • Northern Australia Roads Programme - $192.2 million ($94.9 million in 2017-18)

    For more information, please contact UDIA National CEO, Steve Mann: smann@udia.com.au

    Click here to view UDIA's National Media Release.