The 2017 Federal Budget was handed down last night. Following is a brief summary of some of the headline measures that may impact you or your clients.
- Instant Asset Write-Off – The $20,000 instant asset write-off for small business will be extended by 12 months to 30 June 2018, for businesses with an aggregated annual turnover of less than $10m. Assets must be acquired and installed ready for use in your business by this time.
- Access to the CGT Small Business Concessions Tightened – Access to the CGT Small Business concessions will be tightened from 1 July 2017 to deny eligibility for assets which are unrelated to the small business.
- Foreign Worker Levy – As an incentive to employ Australian workers, businesses that employ foreign workers on certain skilled visas will be required to pay a levy that will provide revenue for a new Skilling Australians Fund from March 2018.
- Medicare Levy Increased – From 1 July 2019, the Medicare levy (as distinct from the Medicare levy Surcharge for high-income earners) will be increased from 2.0% to 2.5% of taxable income. Other tax rates that are linked to the top personal tax rate, such as the FBT rate, will also be increased.
- HELP Repayment Thresholds Made Stricter – A new set of repayment thresholds and rates under the Higher Education Loan Program (HELP/HECS) will be introduced from 1 July 2018. A new minimum repayment threshold of $42,000 will be established with a 1% repayment rate. Currently, the minimum repayment threshold for 2017/2018 is $55,874 with a repayment rate of 4%.
Housing Affordability Measures
- Access to Super for First Home Deposits – Individuals will be able to make voluntary contributions to superannuation of up to $15,000 per year and $30,000 in total, to be withdrawn subsequently for a first home deposit. The contributions can be made from 1 July 2017 and must be made within an individual’s existing contribution caps. From 1 July 2018, an individual will be able to withdraw these contributions and their associated deemed earnings for a first home deposit. The withdrawals will be taxed at an individual’s marginal tax rate, less a 30% tax offset. Couples saving for a first-home deposit can access this measure and double the benefit.
- Super Contributions from Downsizing – Individuals aged 65 or over can contribute up to $300,000 from the proceeds of the sale of their home as a non-concessional contribution into superannuation, from 1 July 2018.
- Travel Deductions Limited – Deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed from 1 July 2017.
- Plant and Equipment Deductions Limited – Plant and equipment depreciation deductions will be limited to outlays actually incurred by investors in residential real estate properties from 1 July 2017
- Main Residence Exemption Denied – Foreign and temporary tax residents will be denied access to the CGT main residence exemption from 9 May 2017. Existing properties held before this time will be subject to transitional arrangements until 30 June 2019.
- Foreign Owners Taxed – An annual levy of at least $5,000 will be imposed on foreign owners of under-utilised residential property, for example where the property is not occupied.
- New Residential Properties – Purchasers of new residential properties or new subdivisions will be required to remit the GST directly to the ATO (rather than pay it to the seller) as part of settlement from 1 July 2018.
- Bitcoin Changes – The GST treatment of digital currency (such as Bitcoin) will be aligned with that of money from 1 July 2017. This measure will ensure purchases of digital currency are no longer subject to GST.
Although we’ve covered most of the headline measures, the Budget Papers run into hundreds of pages. To access the papers in full, go to www.budget.gov.au
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