2017 Federal Budget Review

The Federal Treasurer, Mr Scott Morrison, handed down the governments Federal Budget on the 10th of May 2017.

Compared to previous versions of the Federal Budget, this version is somewhat subdued. As always however, there are winners and losers and we will provide a summary below of what those changes mean to individuals, business owners and superannuants.

From a small business perspective, the most significant thing to come out of this budget is the extension of the instant asset immediate write-off cap of $20,000 being extended for another 12 months to 30 June 2018. This is a big win for businesses trying to grow and, subsequently helps stimulate the economy and ultimately create more jobs.

From a superannuation perspective we finally see a budget without significant changes which would have added further uncertainty on already cautious superannuants, however strategies which included gearing up SMSF’s so superannuants could get their balances under the $1.6m balance transfer cap have been halted with the inclusion of limited recourse borrowing arrangements being included in a members total superannuation balance.

 

Budget at a Glance

SMEs

  • Access to the small business CGT concessions will be tightened from 1 July 2017 to deny eligibility for assets which are unrelated to the small business.
  • 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 $10 million.

GST

  • Purchasers of new residential properties or new subdivisions will be required to remit the GST directly to the ATO as part of settlement from 1 July 2018.
  • The GST treatment of digital currency (such as Bitcoin) will be aligned with that of money from 1 July 2017.
  • Access to diplomatic and consular concessions under the Indirect Tax Concession Scheme has been extended.

Superannuation

  • The use of limited recourse borrowing arrangements will be included in a member’s total superannuation balance and transfer balance cap from 1 July 2017.
  • Opportunities for members to use related party transactions on non-commercial terms to increase superannuation savings will be reduced from 1 July 2018.
  • The current tax relief for merging superannuation funds will be extended until 1 July 2020.

Individuals and Families (inc. Housing Affordability Measures)

  • The Medicare levy will be increased from 2.0 per cent to 2.5 per cent of taxable income from 1 July 2019. Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased.
  • The Medicare levy low-income thresholds for singles, families, and seniors and pensioners will increase from the 2016-17 income year.
  • A new set of repayment thresholds and rates under the higher education loan program (HELP) will be introduced from 1 July 2018.
  • Individuals will be able to make voluntary contributions of up to $15,000 per year from 1 July 2017 and $30,000 in total, to be withdrawn subsequently for a first home deposit. Withdrawals can begin from 1 July 2018. Couples will be able to both access the scheme and combine savings for a single deposit.
  • A person aged 65 or over can contribute up to $300,000 from the proceeds of the sale of their home as a nonconcessional contribution into superannuation, from 1 July 2018.
  • 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 depreciation deductions will be limited to outlays actually incurred by investors in residential real estate properties from 1 July 2017.
  • Managed investment trusts will be able to invest in affordable housing, allowing investors to receive concessional tax treatment, provided certain conditions are met, including that the properties are let as affordable housing for at least 10 years.
  • The CGT discount for Australian resident individuals investing in qualifying affordable housing will be increased from 50 per cent to 60 per cent from 1 January 2018.
  • Foreign and temporary tax residents will be denied access to the CGT main residence exemption.
  • The foreign resident CGT withholding rate will be increased to 12.5 per cent and will apply to Australian real property and related interests valued at $750,000 or more.
  • An annual levy of at least $5000 will be imposed on foreign owners of under-utilised residential property.
  • A 50 per cent cap on foreign ownership in new developments will be introduced through a condition on new dwelling exemption certificates.
  • The principal asset test in Div 855 of the Income Tax Assessment Act 1997 will be applied on an associate inclusive basis for foreign tax residents with indirect interests in Australian real property.
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