Treasurer Scott Morrison, delivered the 2017-18 Federal Budget fostering ‘Fairness, Opportunity and Security’ and a vision to return the budget to a $7.4 billion surplus in 2021.
The Budget’s proposed ‘practical’ measures were based on four main principles:
1. Stronger growth to deliver more and better paying jobs
2. Guaranteeing the essential services that Australians rely on
3. Tackling cost of living pressures
4. Ensuring the Government lives within its means.
Some commentators see it as a ‘busy’ Budget that engenders ‘winners’ and ‘losers’.
So what were the key announcements?
Housing affordability measures
Housing affordability was invariably a hot topic, with proposed measures needing to positively impact both supply and demand – without causing a shock to the housing market. As the Treasurer put it, ‘there was no silver bullet’.
First homebuyers and superannuation
One of the biggest anticipations in the Budget was the Government’s approach to improving housing affordability for first homebuyers. Under the newly proposed ‘first home super saver scheme’:
Importantly, if you are a member of a couple, you may both take advantage.
From 1 July 2017, residential property investors will no longer be able to claim a tax deduction for travel expenses for personally inspecting, maintaining or collecting rent for their residential rental property; however, can continue to claim travel expenses incurred by third parties such as property management services.
Furthermore, from 1 July 2017, the Government will limit plant and equipment depreciation deductions to outlays incurred by the current owner of a residential real estate property; however, existing investments will be grandfathered.
Aged 65 or over and superannuation
From 1 July 2018, individuals aged 65 or over will be able to make a non-concessional (post-tax) contribution of up to $300,000 to superannuation using the proceeds of the sale of their home, provided it has been owned for 10 years or more. It is important to note that:
From 1 January 2018, resident individuals who elect to invest in qualifying affordable housing will be entitled to a 60% capital gains tax discount (up from the existing 50%). To qualify for the new capital gains tax discount, the relevant housing investment must be:
The Government has proposed measures targeted at foreign investors in relation to capital gains tax. For example:
In addition, from 9 May 2017:
Other major measures
Taxpayers, the Medicare Levy and the National Disability Insurance Scheme
In an effort to address the underfunded National Disability Insurance Scheme (NDIS), many taxpayers may soon be required to pay more in tax from 1 July 2019. The Government is proposing an increase in the Medicare Levy from 2% to 2.5% of taxable income. This move is intended to ensure that the NDIS becomes fully funded.
Childcare and Family Tax Benefits
The Government has proposed more efficient targeting of the Child Care Subsidy to only families that have household incomes less than $350,000 per annum (in 2017-18 terms).
Furthermore, from July 2017, the existing Family Tax Benefit payment rates will remain unchanged at their current levels for the next two years. Lastly, from 1 July 2018, for families with a household income greater than $94,316, the Family Tax Benefit Part A will have a $0.30 in the dollar income test taper applied.
The instant tax offset will continue for another year, so small businesses with $10 million turnover per annum will be able to write off expenditure up to $20,000 immediately.
In addition, from 1 July 2017, small business capital gains tax concessions will be amended to ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.
Pensioner Concession Card, Age Pension, Disability Support Pension and Energy Assistance Payment
There were several revisions to the social security environment for pensioners and recipients of the Age Pension and Disability Support Pension.
It is important to note that existing exemptions will continue to apply for Disability Support Pension applicants that become disabled whilst in Australia.
From 1 July 2018, the non-arm’s length income provisions will see expenses that would apply in a commercial transaction included when considering whether or not the relevant transaction has been made on a commercial basis.
In addition, from 1 July 2017, the outstanding balance of a limited recourse borrowing arrangement will be included in a member’s annual total superannuation balance. Lastly, the repayment of the principal and interest of a limited recourse borrowing arrangement from a member’s relevant accumulation account will be a credit in the member’s transfer balance account.
The higher education system has been altered to foster an environment of ‘sustainability and responsiveness to the aspiration of students’. The reality of the proposed measures will see university funding reduced as well as university students facing increased university course fees and the earlier repayment of their HECS debt:
The somewhat ‘silver lining’ in the higher education reform is that Commonwealth Supported Places will now be made available for education programs, such as diplomas.
The big banks
From 1 July 2017, Australia’s big five banks (ANZ, Commonwealth Bank, Macquarie, National Australia Bank and Westpac) will be hit with a ‘Major Bank Levy‘ calculated quarterly as 0.015% (an annualised rate of 0.06%). This new levy will be aimed at boosting the Government’s proposed return to surplus in 2021. It’s anticipated that the levy will generate in the tune of $6.2 billion over the forward estimates.
Economists have warned that the levy:
Other proposed measures of the Budget include infrastructure spending, reforms to JobSeeker payments, and the Medicare Benefits Scheme.
For more information on what the Budget may mean for you please watch Sandra Sully’s summary, and the roundup from the Institute of Public Accountants.