Federal Budget 2017-2018

Federal Budget 2017-2018

On Tuesday, 9 May 2017, Treasurer Scott Morrison handed down the 2017-18 Federal Budget.

We’ve cherry picked those tax and superannuation changes which will impact most of our clients – the highlights are set out below.

For detailed information and further related announcements, the full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.

This information is based on an extract from Thomson ReutersInfographic and summary provided by Chartered Accountants Australia and New Zealand

This year’s federal budget replaces $13 billion of zombie measures with two new revenue initiatives. A new levy on big banks will raise $6.2 billion. The medicare levy will be increased by 0.5% to 2.5%, raising $8 billion to ensure the NDIS is fully funded.

$50 billion has been allocated to new infrastructure projects including a new airport for Western Sydney, the Melbourne to Brisbane inland rail project and the National Rail Project.

Innovation has not been forgotten with $100 million fund for new manufacturing projects, GST removed from digital currencies and an open banking regime allowing customers more access to their own data.

Other Key Announcements:

Business

  • The current instant asset write-off for assets up to $20,000 will be extended to 30 June 2018
    • The threshold will revert to $1,000 on 1 July 2018
    • Applicable for small businesses with turnover up to $10M
    • The assets must be ready and available for use by 30 June 2018 to be eligible
  • From March 2018 businesses that employ foreign workers on certain skilled visas will be required to pay a levy to fund the new Skilling Australians Fund
  • Taxable payments reporting (currently only applicable to the building and construction industry) will be extended to couriers and cleaners
    • It appears that the Government will keep widening the net with this approach as it focuses on targeting the black economy
  • From 1 July 2018 there will be a requirement for purchasers of new residential property to remit GST directly to the ATO at settlement (rather than the developing remitting it via their BAS)
  • The Government has reiterated its desire to reduce the corporate tax rate to 25% for all companies; this is however subject to the changes being passed by the senate. But for now we have the rates as legislated under the Enterprise tax plan (as amended by the Senate) which will apply from 1 July 2016 (the 2017 Financial Year)
    • From 1 July 2016 the tax rate for companies carrying on a business will be progressively reduced to 25% based on their turnover (companies with a turnover of greater than $50M will not qualify as a result of the senate amendments)
    • It is important to note that:
      • Companies that only hold passive investments (e.g. Corporate Beneficiaries/’Bucket Companies’ will not qualify for a reduced tax rate and will continue to pay tax at a rate of 30%
      • The reduction in the corporate tax rate will impact on the amount of franking credits a company can attach to its dividends, we will be canvassing how this impacts our clients when we conduct our annual tax planning over the coming weeks

Source: Thomson Reuters

Individuals and Families

  • The 2017-18 Budget contained no changes to the personal income tax rates and thresholds
  • 2% Budget Deficit levy will end on 30 June 2017 as planned
  • Medicare Levy will increase to 2.5% (from 2%) from 1 July 2019
  • New limits on deductions for investment properties:
    • Going forward you will only be able to claim depreciation on plant and equipment actually purchased (i.e. you cannot depreciate an asset already at the property purchased by a previous owner with reference to a quantity surveyor’s report)
      • These changes will apply on a prospective basis from 9 May 2017, accordingly any plant and equipment held prior to the budget will continue to be depreciated under the existing rules
    • No deduction will be allowable for travel expenses for inspecting/maintaining a residential rental property from 1 July 2017
  • The Government has proposed to increase in the CGT discount to 60% for investment in affordable housing. The details of this measure will follow after consultation (e.g. the definition of affordable housing for the purposes of qualifying for the increased discount)
  • CGT Changes for Foreign Investors
    • Foreign residents will not be able to access to the main residence exemption
    • There will be an increase in CGT withholding rate (up to 12.5% from 10%) and lowering of the withholding threshold to $750,000 (down from $2M) – accordingly this will capture significantly more transactions
  • HELP Debt Repayment threshold reduced to $42,000 from 1 July 2018 (see the new repayment table below)

Source: Thomson Reuters

Superannuation

  • From 1 July 2018 the Government will allow a person aged 65 or over to make a super contribution of up to $300,000 from the proceeds of selling the family home
    • These contributions are in addition to the contributions allowable under the existing contribution caps
    • They are exempt from the requirement to pass the work test and have a Total Superannuation Balance of less than $1.6 million– not subject to the work test or the $1.6M test
  • From 1 July 2017 the Government will introduce a First home super saver scheme
    • Under the scheme, aspiring first home buyers will be able to salary sacrifice up to $15,00 per year (and $30,000 in total) subject to the existing caps
    • Withdrawal for the purpose of funding a deposit will be allowed from 1 July 2018, and the withdrawals will be taxed at marginal rates less 30%
    • You will be able to withdraw your contributed amounts plus a deemed associated earnings

 

Access the full Budget Tax Bulletin from Thomson Reuters here.