Budget 2017
Please note: All Budget announcements are only Government proposals – they are still required to pass through the senate.
So, what happened on budget night?
Impacts on you:
- The Medicare levy is proposed to increase from 2% to 2.5% from 1 July 2019.
- The Budget Repair Levy was not extended, therefore the top marginal tax rate will revert to 45% plus Medicare levy of 2.5% for income greater than $180,000 from 1 July 2017. (However, Labour have indicated they will try to retain it).
- The Government want you to start repaying your HELP Debt earlier than before. The repayment threshold will be reduced from $54,000 to $42,000 with a 1% repayment rate as from 1 July 2018. The maximum threshold will increase from $107,214 to $119,882 with a 10% repayment rate.
Impacts on your business:
- The corporate tax rate is to be reduced to 27.5% for companies (Small Business Enterprise) with annual aggregated turnover of less than $10 million for the 2017 financial year. While this tax reduction helps companies, it will have an impact on tax offsets/imputation credits when dividends are paid to shareholders.
- The $20,000 immediate deductibility of eligible assets for small businesses has been extended for another year. The asset must be installed and ready for use before 30 June 2018. As the small business aggregated turnover eligibility threshold is due to increase from $2 million to $10 million, many more businesses previously ineligible can now qualify.
Impacts on your superannuation:
- From 1 July 2017, individuals can make voluntary contributions of up to $15,000 (up to a total of $30,000) to their superannuation to enable them to acquire their first home. The contributions can be either concessional contributions or non-concessional contributions and will be measured against the relevant cap. We expect this will deliver only a limited benefit – we will have to wait for the detail.
- From 1 July 2018, a person aged 65 or over will be able to contribute up to $300,000 into superannuation from the proceeds of the sale of their principle residence if they have lived in it for more than 10 years. The contribution will be treated as non-concessional and will be exempt from the age test, the work test and the non-concessional balance cap. They will however still be subject to the transfer balance cap rules in respect of any pension amount.
Impacts on the investor:
The government has tried to make housing more affordable for new homeowners, by reducing the taxation benefits to investors. We are doubtful that these changes will have any significant impact.
- Depreciation expenses for plant & equipment will be limited to purchases actually incurred by investors in residential real estate properties. This will apply from 9 May 2017. Depreciation on existing assets before this date can continue to be claimed.
- Travel expenses by owners in relation to residential rental properties will no longer be deductible from 1 July 2017.
Impacts on property sales:
- From 1 July 2017 any vendor selling real estate with a market value greater than $750,000 (down from $2 million) will be required to obtain a taxation clearance certificate before settlement.
Impacts on the developer:
- From 1 July 2018, purchasers of newly constructed residential properties or new subdivisions will be required to remit the GST directly to the ATO as part of settlement. While the Government considers that most purchasers obtain professional conveyancing services and therefore the impact of this change on purchasers will be minimal, we expect this will add a further level of complexity to BAS for the seller.
If you have any questions regarding these announcements, please contact Paul Chakos or Ian Hogbin from HQB Chartered Accountants.
Posted 11.5.17
This article is compiled as a helpful guide for your private information and is subject to copyright. We suggest that you do not act solely on the basis of material contained in this article because items are of general nature only and may be liable to misinterpretation in particular circumstances. We recommend that our advice be sought before acting on any of these crucial areas.
