The biggest change in this year’s budget for individuals is the lift in the Medicare Levy to 2.5% from 01 July 2019. Although it is also the change that the labour party has flagged they may oppose for lower income earners, so watch this space.
There are very few significant taxation changes in the Budget and it has generally been described as being softer than most commentators predicted, unless you are a major bank who will bear the brunt of a new levy.
Whilst there has been some progress toward repairing the budget deficit, significant more work is needed in this area.
To summarise, the main features of Budget are:
Individuals and families
Personal income tax
– The Medicare levy is to be increased to 2.5% from 01 July 2019 to fund the National Disability Insurance Scheme, although the 2% Budget deficit levy will end on 30 June 2017.
– There are no changes to marginal income tax rates.
Higher Education HELP changes
– The threshold above which those with HELP debt will need to make payments reduces from $55,874 to $42,000 from 1 July 2018. The rate applicable starts at 1% and gradually increases to 10% for those with incomes of $119,982 or more.
Trips inspect a residential rental property will no longer be deductible
Foreign investors CGT changes
– Foreign and temporary tax residents will no longer have access to the CGT main residence exemption from 9 May 2017 (existing holders are grandfathered until 30 June 2019).
Annual charge on foreign owners of underutilised residential property
– A new charge will apply where a property is not occupied or genuinely available for rent for at least 6 months of the year.
Depreciation on residential rental properties plant and equipment restricted
– To assets actually acquired by investors.
New residential premises: purchasers to pay GST directly
– Purchasers rather than developers will be responsible for passing on the GST to the tax Office as part of the property settlement process from 01 July 2018.
Super contribution for “downsizers”
– 65’s and over who sell their home they’ve owned and lived in for at least the past 10 years can make a non-concessional contribution of up to $300,000 each from 01 July 2018.
First Home Superannuation Saver Scheme
– First home buyers will be able to contribute up to $15,000 per year ($30,000 in total) into super and withdraw the amount plus earnings after 1 July 2018 as deposit on a first home.
Increased turnover threshold for small business concessions
– The instant asset write off ($20,000 threshold) for small business entities has been extended by 12 months to 30 June 2018. The small business entity turnover threshold will be increased to $10 million will apply retrospectively from 1 July 2016
CGT Small business concessions: restricted to assets used in the business
Staggered cuts to the company tax rate
– The company tax rate will be progressively reduced to 25% over 10 years.
– From the 2016/17 income year, the company tax rate for businesses with an annual aggregated turnover of less than $10 million will be reduced to 27.5%, and the same for less than $25 million in 2017/18.
Major Bank Levy
– Major banks will have no pay a new levy of .06% of an ADI’s licensed entity liabilities from 1 July 2017.
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