Summary of the Federal Budget 2017-18
The Treasurer, the Hon Scott Morrison delivered the 2017-18 Budget on 9 May 2017, below is a brief summary and overview:
The major superannuation changes had already been announced. However, in this Budget the Government announced housing affordability measures and tax integrity measures applying to specific superannuation investments.
First home buyers are now able to save for a deposit on their first home by salary sacrificing into their superannuation, up to $15,000 per year to a total of $30,000. These amounts can be contributed within existing aged based contribution limits of $25,000 per annum. This balance can be withdrawn to purchase a home.
Pensioners are also big winners with the other major announcement on Tuesday night, allowing a one off $300,000 non-concessional contribution from the proceeds of sale of their primary residences.
Under new integrity measures, property developers will no longer manage the GST on sales of newly constructed residential properties. Instead the Government will require purchasers to remit the GST directly to the ATO as part of the settlement process.
The instant asset write-off on eligible assets less than $20k is being extended for small business for another year. The threshold reverts back to $1,000 on 1 July 2018.
The turnover threshold to access the small business concessions has increased from $2 million to $10 million in the 2017 financial year and will increase to $25 million in the 2018 financial year.
However access to small business CGT concessions has been tightened and the turn over threshold will remain at $2 million.
The budget has tightened deductibility on a couple of areas for property investors. Travel to inspect real estate investments has been restricted, as has depreciation of plant & equipment acquired with an existing residential property. You cannot continue to claim deductions on plant & equipment from the original owner of the property. Only assets purchased by you as the original owner will qualify as allowable depreciation.
Foreign property owners will be charged a levy if the property is not occupied for at least 6 months per year. This applies from budget night for all new investment applications.
Personal Income Tax
With the exception of an increase in the Medicare Levy from 2% to 2.5% from 1 July 2019, income tax rates remain unchanged. A marginal tax bracket was adjusted from $80,000 to $87,000 effectively extending the 37% bracket out another $7,000.
The HELP threshold reduces to $42,0000 from $51,957 effective from 1 July 2018.
Finance and Investment
Effective from 1 July 2017, a major bank levy will be imposed on effectively the Big 4 banks and Macquarie, the ACCC will undertake a residential mortgage pricing inquiry for the first year to ensure that the levy isn’t passed on to customers. Also from 1 July 2017, Managed Investment Trusts will have the ability to acquire, construct or redevelop property to hold as affordable housing. Investors in these vehicles may therefore access concessional taxation treatment. In order for investors to gain access to these tax concessions, MITs will need to meet specific criteria prescribed under the new rules. To further encourage investment in new and existing affordable housing, the Government has announced that as of 1 January 2018, Australian resident individuals investing in qualifying affordable housing will be entitled to a 60% discount on capital gains where they hold their investment for three years.
Medical Benefits Scheme
Indexation will be reintroduced for elements of the Medicare Benefits Schedule. Bulk billing incentives for GP’s will be indexed from 1 July 2017, standard consultations by General Practitioners and specialist attendances will be indexed from 1 July 2018 and specialist procedures and allied health services will be indexed from 1 July 2019.
The government is seeking to boost the economy by investing in $20b over 10 years in the improvement of regional and urban transport networks around the country to assist regional businesses to connect with customers. A further $2.2b in extra funding for schools over 4 years is also being made.
To view the full comprehensive review of the Budget click here.