As we have said before, we like to wait a few weeks before going to press with our thoughts about the annual Commonwealth Budget. This year has been no exception: we had scheduled our 2017 Budget special for this week.
The problem is, compared to previous years, the 2017 Budget was a bit of an anti-climax! In previous years, there have been a number of big-ticket changes – such as the big changes to superannuation that we have been discussing in recent articles. But this year there have simply been a whole lot of small changes, some of which will be of benefit and others will represent a small loss.
In this article, we examine those changes that are most likely to affect our clients. So, have a read of our thoughts and decide for yourself whether you’re a budget winner or a budget loser.
The government announced that the National Disability Insurance Scheme is now fully funded – the remaining funding has been raised by an increase in the Medicare levy (see below).
Home owners aged over 65
One potential winner – although see the recent article in our June newsletter – are older Australians who own their own home. Those people will be able to sell the home, and contribute up to $300,000 of the proceeds as a non-concessional contribution into their super fund. Couples can contribute up to $300,000 each. This $300,000 will not be subject to the standard limits on non-concessional contributions. It is hoped that this change will encourage older Australians to downsize their family home. That said, relatively few people are likely to see any advantage in this change.
For the past number of years, Medicare rebates paid to doctors and other health professionals have been frozen. This has caused many health practitioners to charge a gap for seeing them. From next year, they will begin to be unfrozen (thawed?), with the process taking three years to complete.
First Home buyers
First home buyers will be able to use their superannuation fund to help save for a house deposit. They will be able to contribute up to $15,000 in a particular year, such that the total contributions are no more than $30,000. They will then be able to withdraw these contributions to fund a house deposit.
For a number of years, small businesses have been able to access an immediate tax offset on expenditures of up to $20,000. This has been extended for at least another year.
The Medicare levy is going to increase from 2% to 2.5% of taxable income. This increase is slated to help fund the National Disability Insurance Scheme and will take effect from 1 July 2019. Basically, all taxpayers will now pay 0.5% more tax.
The banking tax
In our newsletter earlier this month, we discussed the introduction of a new levy that will be imposed on Australia’s five biggest banks. You can expect that this levy will flow through to increased bank costs for some, if not all, bank customers. So, if you’re a borrower of any kind, you’re probably going to see your borrowing costs being higher than otherwise they would be.
Two changes are happening to university fees. The first is a simple increase in their amount. By 2022, university fees will have risen by 7.5%.
The second change is a lowering in the threshold income above which university loans need to be repaid. At the moment, the threshold is $55,000 – meaning that a person does not need to start repaying their student loans until the taxable income crosses this threshold. From 1 July 2018, the threshold will drop to $42,000. People will still need to repay the same amount – but they can expect to need to start repaying it sooner.
There will be some changes for nonresidents. Only Australian citizens will be able to apply for a Commonwealth supported university place – the kind in which the Commonwealth pays the fee and the student then later repays the government as discussed above. At the moment, permanent residents and New Zealanders have been eligible for Commonwealth supported places.
Non-resident homeowners will have to pay capital gains tax when they sell their principal place of residence (unlike resident homeowners, for whom the family home is capital gains tax exempt).