Dave’s Budget Breakdown

Federal Treasurer Mr Scott Morrison, announced that the 2017 / 18 Federal Budget is focused on boosting the economy and households, so that “we live within our means and are able to return the Budget to balance in 2020/21”.

Below, please view Highview Partner Dave Sheahan’s summary of the 2017/18 Federal Budget. He’s prepared this breakdown to assist our clients in understanding the key points that may affect them moving forward. Please note these are proposed changes and are required to be passed through Parliament. Should you have any queries regarding how the budget will affect you directly we advise you contact your Highview Accountant – we are here to help!

2017/18 FEDERAL BUDGET

Small Business, Investment & Taxation

$20,000 Immediate Asset Deduction Extended

  • Instant deduction for each asset purchased under $20,000 extended until 30 June 2018
  • Available to ‘Small Businesses’ – $10m turnover threshold from 1 July 2016

Rental Property

  • Travel expenses disallowed from 1 July 2017 for inspecting, maintaining, and collecting rent.
  • Depreciation deductions for plant & equipment disallowed where the property is purchased with these items. These costs form part of the cost base. Only where the current owner incurs these costs can they claim depreciation on these items. From 9 May 2017

Tax Incentive for Investing in Affordable Housing

  • CGT discount of 60% instead of 50% – from 1 January 2018
  • Must provide property for low to moderate income tenants, with discounted rent
  • Managed through community housing provider
  • Must be held for a minimum of three years

First Home Super Saver Scheme

  • Voluntary contributions of up to $30,000 (maximum of $15,000 per year) into their superannuation account to purchase a new home
  • Voluntary contributions can be Concessional or Non-Concessional – Concessional Contributions & Associated earnings are taxed per normal at 15%
  • These contributions and the associated earnings can be withdrawn for a first home deposit from 1 July 2018.
  • Concessional contributions and related earnings withdrawn are taxed at individual’s tax rate less a 30% per cent offset.
  • Contributions are subject to the usual caps
  • Salary sacrificing (Concessional contributions) likely provide the best return

‘Taxable Payments Reporting’ Additional Industries

  • Courier and Cleaning industries added to property and construction industry

Medicare Levy

  • Increased from 2% to 2.5% on 1 July 2019 to fund the National Disability Insurance Scheme

HECS / HELP

  • Threshold reduction to $42,000 down from $56,000, starting with a 1% rate from 1 July 2018

GST

Purchasers of New Residential Properties to Remit GST

  • Purchasers of newly constructed residential properties or new subdivisions will be required to remit the GST directly to the ATO as part of settlement

Superannuation Measures

Proceeds of Downsizing Contributed to Superannuation

  • Aged over 65
  • Additional Non-Concessional Contribution of up to $300,000
  • Must have owned for a minimum of 10 years
  • Exempt from $1.6m total superannuation balance test
  • Not Exempt from $1.6m transfer balance test
  • From 1 July 2018
  • $600,000 available for a couple
  • Sale proceeds contributed via this method will count towards the Age Pension Assets Test

Superfund Borrowings (LRBA’s) & Transfer Balance Cap

  • LRBA’s will be included in member’s total superannuation balance and transfer balance cap from 1 July 2017

2017/18 VICTORIAN STATE BUDGET

Payroll Tax

  • Exemption threshold increased as follows,
  • 1/7/17 – $600,000             1/7/18 – $625,000            1/7/19 – $650,000
  • 25% Reduction for regional businesses. Rate reduced from 4.85% to 3.65%, provided 85% of employees are from regional areas.

Other Recent Changes Implemented or Proposed

Personal Tax Rate Changes

  • Threshold increased from $80,000 to $87,000

Reduction in Corporate Tax rate

  • Turnover <$10m – 27.5% for 2016/17 (17/18 – $25m, 18/19 – $50m)
  • 25% rate by 2026/27

Superannuation

  • $1.6m pension transfer cap introduced
  • Concessional contribution reduction down to $25,000 for everyone
  • Catch-up concessional contributions available (above the $25k cap)
  • Non-concessional caps reduced – down to $100,000
  • Low income superannuation tax offset introduced
  • Earnings in Transition to Retirement Income Streams will change from 0% to 15%

CGT

  • Small business restructure roll-over relief

Working Holiday Makers

  • 15% tax rate on first $37,000

CGT Changes for Foreign Investors

  • Denying foreign & temporary tax residents access to the main residence exemption, existing properties eligible until 30 June 2019 – other rules to limit disaggregating
  • Foreign Residents CG withholding – withholding increased to 12.5% from 10%
  • CGT withholding threshold reduced to $750,000 from $2m (for those with a company title interest)

Annual Charge on foreign Owners of Underutilised Residential Property

  • At least $5,00 per annum

Restriction on Foreign Ownership in New Housing Developments

New 50% cap on foreign ownership in new housing develop

 

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