The 2017 Budget – What’s in it for you?
It can sometimes be difficult to get to the nitty gritty of how new Government budgets affect you and your family. We have reviewed the budget and have written the following commentary on how these new policies and guidelines will affect our clients.
The Government didn’t turn up too many surprises in this Budget, and it was generally in line with expectations of the financial pundits. There are no major sweeping changes but more a fine tuning of what has come before. For us it does feel like the Government has attempted to balance the needs of big business, social responsibility, and their responsibility to tax paying Australian citizens. There is a whiff of social change in this budget. It would seem the Government is listening.
Housing has been one topic that has been burning in Sydney and Melbourne for some years. The Government has proposed changes that will affect the market, and provides a small step up for first home buyers.
Launch of a First Home Super Savers Scheme
This allows first home buyers to contribute pre-tax income to their existing super account at a tax rate of 15%, rather than at their current marginal tax rate. Withdrawals will be taxed at the marginal rate less 30%. Contributions would be limited to $30,000 per person in total and $15,000 per year. People can begin to withdraw this money from 2018.
Over 65, downsizing, and super
Home owners over the age of 65 have been encouraged to free up housing and downsize homes now by being able to make non-concessional contributions of up to $300,000 into their superannuation fund from the sale of their principal home. Importantly, this contribution will sit outside the normal non-concessional contribution cap as well as the new $1.6mil cap on total super balances for non-concessional contributions. It will also circumvent the need for those aged 65 and up to meet the work test.
Travel expenses for investment properties not deductible
Negative gearing laws have been tightened and travel related to your investment property is no longer deductible.
A foreign investor is now required to lease their property for at least 6 months of the year. If they fail to do so, or leave it vacant they will be subject to a $5,000 levy. They will now also have to pay capital gains tax on their main residence. Any new developments are now also capped at 50% foreign ownership.
Increase in Medicare levy
In two years the Medicare levy will be increased. This is to fund the National Disability Scheme and the increase is pegged at 0.5%.
Changes to bulk billing and rebates
There has been a softening on bulk billing and the freeze on some Medicare rebates has been lifted.
No changes to personal tax rates they remain the same as per the below graph, as mentioned the Medicare levy is lifting 0.5% in two years.
Business and banks
Small businesses with a turnover of less than $10m will still be eligible for the immediate write off of purchases up to $20k.
Every employee on a temporary work visa will cost a business up to $1,800 each year, while businesses will pay a one-off levy ($3,000 or $5,000) for workers on a permanent skilled visa.
Affecting the big banks a new 0.06% levy coming into effect on July 1. The banks are rumbling that it will just be passed back to consumers.
Free to Air
To even the playing field with the pay for play model, the huge license fees have been abolished in favour of smaller annual fees. Lets see what happens to content. Will free to air rise again?
Sydney Airport has declined to build the new airport and the Government will now build and operate it, creating 20,000 jobs by the early 2030s and 60,000 jobs over the long term.
After years of lobbying, farmers have got their inland rail link which will let them move more goods and produce more efficiently. $8.4b project creating a peak of some 16,000 jobs.
Some $75b in funding for infrastructure over the next ten years.
This is only a brief synopsis of a very large document that affects how we live and work. It presents opportunities for some and losses for others, and at this stage is all just proposals by the current government, which need to go through the normal political process before actually coming in to affect.
- Will the big banks pass on the news cost?
- Will the inland railway affect trucking companies?
- How can you be positioned to take advantage of the infrastructure spend?
- Will the changes to overseas buyers slow the market and let first home owners back in?
The prediction is for wages to grow at 2-3% over the next 4 years with the budget in surplus of $7.4b by 2021.
It is a measured budget that does address some of the pressing needs of our citizens. Now we need to see how effective the implementation is.
As always if you need some advice please do not hesitate to contact us.