15 May 2017
2017 Federal Budget Update
Key tax changes that may affect you
First Home buyers
The Government will encourage home ownership by allowing first home buyers to save a deposit for their first home within their superannuation fund.
First home buyers can salary sacrifice up to $15,000 per year, up to a total of $30,000 into their superannuation fund. This means that first home buyers can take advantage of contributing pre-tax dollars and only pay 15% tax within the fund itself. Note that concessional and non-concessional contribution caps also apply to these payments.
You can withdraw your contribution from 1 July 2018 to pay for a home deposit. The withdrawal amount from concessional contributions is taxed at the individual’s marginal tax rate with a 30% tax offset. Therefore, this scheme will leave savers better off overall than if they deposited savings into a typical bank account.
Good news for small business with the Government proposing to extend the ‘$20,000 instant asset write-off’ for an extra 12 months for businesses with an aggregated turnover of less than $10 million.
If you are a small business that needs to buy assets such as computers, motor-vehicles, now may be the time to take advantage of this concession.
Rental Property Owners
While there was a sigh of relief that no changes were made to Negative Gearing tax offsets, the Government will, however, limit rental property deductions that were previously made available.
From 1 July 2017:
Depreciation on plant and equipment items such as dishwashers and ceiling fans will only be available to investors who currently own the asset until either the investor no longer owns the asset, or the asset reaches its useful life. In other words, subsequent owners of the property who purchase the pre-existing plant and equipment asset from its previous owner, cannot claim depreciation deductions on that same asset. Instead, acquisitions of existing plant and equipment items will be reflected in the cost base for Capital Gains Tax purposes.
Deductions for travel, for example to personally inspect a property, perform repairs and maintenance or to collect rent, will no longer be allowable.
Individual Income Tax Payers
The Budget seeks to provide extra Government funding in the health system, including funding for hospitals, medical research and bulk billing incentives for GPs and Specialists.
However, the extra funding will be recouped from a rise in the Medicare Levy from 2% to 2.5% from 1 July 2019.
Low income earners will continue to receive relief from the Medicare levy through the low-income thresholds. The thresholds will increase to encompass a greater number of individuals and families who can access this tax relief.
University Students and Graduates
The Government has proposed changes to the thresholds and repayment amounts for those who have a HELP debt. From 1 July 2018, repayment thresholds will be lowered from $54,868 to $42,000. This measure is to encourage faster repayments of student loans.