Blog

2017/18 Federal Budget

The Government handed down the 2017/18 Federal Budget on Tuesday 9th May 2017. The Budget proposes several changes in the following areas;

Personal Income Tax Measures

• Limiting plant and equipment depreciation deductions to outlays actually incurred by investors – for residential investment properties acquired from Budget night.
  From 1 July, 2017, the Government will limit plan and equipment depreciation deductions to outlays actually incurred by investors in residential properties. Plant and equipment items are usually mechanical fixtures, or those that can be ‘easily’ removed from a property such as dishwashers and ceiling fans.

• No deduction for travel expenses for residential rental properties
  From 1 July, 2017, the Government will disallow deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property.

Medicare levy-related changes

• Increase in the Medicare levy from 1 July, 2019
  From 1 July, 2019, the Government will increase the Medicare levy from 2% to 2.5% of taxable income. Other tax rates that are linked to the top personal tax rate, such as fringe benefits tax rate, will also be increased. Low-income earners will continue to receive relief from the Medicare levy through the low-income thresholds for singles, families, seniors and pensioners. The current exemptions from the Medicare levy will also remain in place.

Measures affecting small businesses

• Extending the $20,000 immediate write-off for small business
  Under current law, the $20,000 immediate write-off ends on 30 June, 2017. However, the Government has proposed to extend the concession by 12 months to 30 June, 2018 for businesses with an aggregated annual turnover less than $10 million.

Superannuation

• First home superannuation saver scheme
  The Government will encourage home ownership by allowing first homebuyers to ‘build a deposit’ inside their superannuation fund. Voluntary superannuation contributions of up to $15,000 per year and $30,000 in total, can be contributed by first home buyers from 1 July, 2017. The contribution must be within existing concessional and non-concessional caps. Concessional contributions are taxed at 15% in the fund.

• Individuals aged 65 or over able to contribute the proceeds of downsizing into superannuation
  From 1 July, 2018, the Government will allow a person aged 65 or over to make a NCC of up to $300,000 from the proceeds of selling their home. These NCC’s will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance test for making NCCs.

Measures affecting foreign investors

• CGT changes for foreign investors
  The Government will extend Australia’s foreign resident CGT regime by denying foreign and temporary tax residents access to the CGT main residence exemption from 7:30pm (AEST) on 9 May, 2017. Note that existing properties held prior to this date will only be grandfathered until 30 June, 2019.

• Changes affecting the Higher Education Loan Program (HELP)
  The Government will revise the income thresholds for repayment of HELP debt, repayments rates and the indexation of repayment thresholds from 1 July, 2018. A new minimum threshold of $42,000 will be established with a 1% repayment rate and a maximum threshold of $119,882 with a 10% repayment rate. By way of background, for 2017/18, the minimum threshold is $55,874 and the minimum repayment rate is 4%. The maximum threshold for 2017/18 is $103,766 with an 8% repayment rate.