This year’s 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 are at the centre of the budget to many.
Keeping our future healthy
To ensure all Australians can continue to access timely and affordable healthcare, the Budget announced a new law where a Medicare Guarantee Fund will be setup to pay for all expenses on the Medicare Benefits Schedule and the Pharmeceutical Benefits Scheme (PBS).
To fund these and also guarantee funding for the National Disability Insurance Scheme, the Medicare levy will be increased by 0.5% to 2.5% of taxable income from 1 July 2019, but this is offset by the lifting of the temporary budget repair levy from 1 July 2017.
“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 salary sacrificing into their superannuation account over and above their compulsory superannuation contribution from 1 July 2017. The First Home Super Savers Scheme will attract the tax advantages of superannuation with contributions and earnings taxed at 15%, rather than marginal rates, and withdrawals will be taxed at their marginal rate, less 30% offset. Savings 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 and decide how much of their income they want to put aside to save for their first home deposit.
Contributions will be limited to $30,000 per person in total and $15,000 a year.
To help the new home buyers find housing stock, the Government is encouraging older Australians to downsize their properties and make a non-concessional contribution of up to $300,000 into their superannuation fund from the proceeds of their principal home, if they are aged over 65.
Importantly, the work test requirements that currently apply to persons 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 foreign investment levy of at least $5000 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. 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.
This information has been prepared and issued by BT Financial Group which is the wealth management arm of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714 (Westpac), and is current as at 9/5/2017. BT is a division of the Westpac Banking Corporation. BT's Financial Services Guide can be obtained by contacting your Private Banker.
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