This year’s Federal Budget is focused on health, home and housing. Keeping our healthcare available to all Australians in the long term and living the dream of owning one’s home will be central issues for many Australians.
To ensure all Australians can continue to access timely and affordable healthcare, the Government announced that it will set up the Medicare Guarantee Fund to pay for all expenses on the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme (PBS). The revenue raised from the Medicare Levy will be credited to this fund (excluding amounts to fund the NDIS).
To fully fund the National Disability Insurance Scheme, the Medicare levy will be increased by 0.5% to 2.5% from 1 July 2019,
“If a family or an individual has a roof over their head that they can rely on, then all of life’s other challenges become more manageable,” Treasurer Morrison said.
To help first home buyers get “back into the game”, they will be able to save for a deposit by making additional voluntary contributions into their superannuation account from 1 July 2017. The First Home Super Savers Scheme will enable access to the tax advantages of superannuation with pre-tax contributions and earnings taxed at 15%, rather than marginal rates, and on withdrawal taxed at the relevant marginal rate, less 30% offset. These voluntary contributions plus their deemed earnings can be accessed from 1 July 2018.
Savers will not have to set up a new account, they can just use their existing super account while contributions will be limited to $30,000 per person in total and $15,000 a year. The contributions made will be counted under the relevant contributions caps.
To help the new home buyers find housing stock, the Government is encouraging older Australians, aged 65 or more, to downsize their properties by allowing them to make a non-concessional contribution of up to $300,000 into their superannuation fund from the proceeds of the sale of their principal home.
Importantly, the normal super contribution rules such as work test requirements that currently apply to those aged 65 or older will not apply to these contributions, and they can also be made by those with more than $1.6 million of total superannuation.
And to further increase the stock for affordable housing – this time in the rental market – there are a number of measures mooted.
Tougher rules on foreign investment in residential real estate by removing the main residence capital gains tax exemption and applying a vacancy charge of at least $5,000 on all future foreign investors who fail to either occupy or lease their property for at least 6 months a year.
Developers will also be prevented from selling more than 50% of new developments to foreign investors.
For small business, a reprieve on the $20,000 write off on capital expenditure that was due to end on June 30, 2017. Small business will be able to take advantage of this write off for another year.
And for those older Australians who lost their pensioner concession card by the pension assets test change introduced this year – you will be getting them back.
Education and childcare also rated mentions; university fees will rise by 7.5% by 2021 and childcare rebates will be means tested. More details available in our overview documents.
From 1 July 2017, those looking to buy their first home will be able to make voluntary contributions into their superannuation of up to $15,000 per financial year ($30,000 in total) to save for their deposit. They will be able to withdraw these contributions plus their deemed earnings from 1 July 2018.
From 1 July 2018, older homeowners, aged 65 years and over, will be able to make an after-tax contribution to their super of up to $300,000 using the proceeds from the sale of their family home. The house must be their principal residence and must have been held for at least 10 years. This after-tax contribution will also be exempt from the normal super contribution rules that generally prevent older Australians being able to invest in superannuation.
Small businesses with a turnover up to $10 million will be able to claim a tax deduction for expenditure up to $20,000 until 1 July 2018. The Government remains committed to cutting the company tax rate to 25% for all businesses regardless of size by 2026.
The Medicare levy will be increased by 0.5% to 2.5% from 1 July 2019. This increase to the levy will assist in funding the National Disability Scheme in full, designed to support Australians with permanent and significant disability.
Australians who had the pensioner concession card removed under the pension assets test change introduced earlier this year, will have their concession card reinstated and will regain access to benefits such as cheaper medicine under the Pharmaceutical Benefits Scheme and access to Commonwealth subsidised hearing services.
Fees on university degrees will be increased by 7.5% to be phased in over four years at a rate of 1.8% each year starting from 2018. These fees can still be covered through the Higher Education Loan Program scheme. There will also be changes to the threshold when the loans need to start to be repaid. The income level at which repayments must start will be lowered from the current level of $54,869 to $42,000.
Previous childcare benefits and rebates will be replaced with a single means-tested Child Care Subsidy from July 2018. There will no longer be an annual cap on rebates for families with an income of $185,710 or less. Families with an income between $185,710 and $350,000 will have childcare subsidy rebates capped at $10,000, with wealthier families unable to claim subsidies once combined income exceeds $350,000.
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The tax position described in this Federal Budget update 2017 is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change or further refinement.