2017 Federal Budget Analysis
In summary, first home savers, downsizers and small business are the winners in Treasurer Scott Morrison’s second Budget – while taxpayers face an increase in the Medicare levy. Please Note: These changes are proposals only and may or may not be made law. Please contact our office and I will be happy to discuss any of the proposed measures. An extract from the Federal Budget Analysis prepared by the MLC Technical team, part of GWM Adviser Services Limited, can be viewed here.
Contributions from downsizing the home
Date of effect: 1 July 2018
Individuals aged 65 or older will be able to make non-concessional (after tax) super contributions of up to $300,000, using proceeds from the sale of the family home. This limit will:
Apply on a per person basis
Be in addition to the ordinary non-concessional contribution cap, and
Be available where the home has been owned for at least 10 years.
Unlike other non-concessional contributions, it will not be necessary to meet a work test or have a ‘total super balance’ under $1.6 million. The amount contributed will not be exempt from the assets test used to assess eligibility for the Age Pension.
First home super saver scheme Date of effect: From 1 July 2017 First home buyers will be able to save for a deposit by making voluntary concessional and non-concessional super contributions. Contributions will be limited to $15,000 per year (up to a total of $30,000) and will count towards the relevant contribution cap. Withdrawals can be made from 1 July 2018. Concessional contributions plus assumed earnings withdrawn will be taxed at the person’s marginal tax rate, less a 30% tax offset. The Government has provided an online estimator to help individuals calculate the potential benefit of the scheme.
SMSF borrowings Date of effect: When law is passed Broadly, when new limited recourse borrowing arrangements are established, the loan balance will be included in an individual’s ‘total super balance’. The total super balance is used to determine a person’s ability to:
Make non-concessional contributions
Qualify for a Government co-contribution or a spouse contribution tax offset, and
Make catch-up concessional contributions above the annual caps from 1 July 2018, where certain conditions are met.
Also, repayments made from the SMSFs accumulation balance will count towards the member’s transfer balance cap, if the borrowing supports a pension account. The transfer balance cap limits the total lifetime transfers a person can make to retirement phase pensions.
Medicare levy increase Date of effect: 1 July 2019 The Medicare levy will increase from 2% to 2.5% pa to fully fund the National Disability Insurance Scheme. This increase will flow to a range of other taxes such as Fringe Benefits Tax.
Small business accelerated depreciation Date of effect: 1 July 2017 The ability for small businesses with an annual turnover of $10 million or less to claim an immediate deduction for eligible assets costing less than $20,000 each will be extended for 12 months.
HELP thresholds and rates Date of effect: 1 July 2018 The annual income threshold at which Higher Education Loan Program (HELP) repayments commence will be reduced to $42,000 (currently $54,869). Also, the repayment rate will start at 1% and increase progressively to 10%.
Pensioner Concession Card Date of effect: From 1 July 2017 Individuals who lost entitlement to the Pensioner Concession Card as a result of the 1 January 2017 assets test changes will be reissued with the card. Energy Assistance Payment Date of effect: 20 June 2017 Eligible pensioners will be entitled to a one-off Energy Assistance Payment of $75 for singles and $125 per couple. Eligible recipients include Australian residents who qualify for the Age Pension, Disability Support Pension and Service Pension.
Residency requirements for pensioners Date of effect: 1 July 2018 To be eligible for the Age Pension and Disability Support Pension (DSP), claimants will need to have 15 years of continuous Australian residence unless they have either:
10 years continuous Australian residence, with 5 years of this being during their working life, or
10 years continuous Australian residence, without having received an activity tested income support payment for a cumulative period of 5 years.Existing exemptions will continue to apply for DSP applicants who acquire their disability in Australia.
Family Tax Benefit – Part A Date of effect: 1 July 2018 A single taper rate of 30 cents in the dollar will apply to income that exceeds the Higher Income Free Area ($94,316 in 2016/17). Currently, two tests are applied and the higher payment determines the entitlement. Family Tax Benefit – Part A and B Date of effect: 1 July 2017 The payment rates will not be indexed for two years. Indexation will resume on 1 July 2019.
Liquid Assets Waiting Period Date of effect: 20 September 2018 The maximum Liquid Assets Waiting Period (LAWP) will increase from 13 to 26 weeks. The LAWP is a period an individual will be ineligible to receive Government income support. The new maximum period will apply to:
Singles without dependents with liquid assets of more than $18,000, or
Couples, or singles with dependents, with liquid assets of more than $36,000.
Liquid assets are readily available assets such as bank accounts, terms deposits, shares and managed funds.
If you have any questions regarding this year's budget and the implications it may have on your personal circumstances, or for any other financial advice please feel free to contact me on (07) 55 363936.