10 May Pensioners and penny-savers win, but investors and the rest set to suffer
The second Budget from Federal treasurer Scott Morrison should have first home savers, downsizers and small business grinning. While tax payers in general, banks and foreign residents with property in Australia came out losing. So what does it all mean for you? Our partner and taxation expert Shan Williams gives us his low-down.
The 2017 Federal Budget is palatable for most of the country, especially with the removal of the freeze on the Medicare rebate and measures to discourage businesses from employing foreign workers.
Many of you who are of pension age were hit hard this year following the drop in asset testing, and this budget helps you significantly.
If you’re a small business owner, you’ll also be better off. If your turnover is between $2million and $10 million, you’ll now get to get access to the $20,000 threshold.
On the flip side, we’ll all be worse off with the rise in the Medicare Levy.
Property investors are hit hard – you’ve lost the ability to claim travel to inspect your property and you can no longer depreciate items within an investment property. That’s going to have a significantly negative impact at tax time for you.
Let’s look a little closer at the winners and losers:
First home buyers:
From July 1, you can salary-sacrifice extra amounts (over the compulsory superannuation contribution) into your super fund, up to a maximum of $30,000. You can then withdraw that cash from your super, as well as any earnings on that money to help pay for your house deposit. These will be taxed at normal superannuation rates, and the contribution taxed at 15%.
If you are aged 65 or over and want to downsize your current home, you’ll be able to make a non-concessional contribution to your super from the sale of up to $300,000 as long as you have lived in the house for 10 years or more. This contribution is available to both members of a couple and is in addition to any current contribution rules and caps.
Need to see a doctor?
You could also be a winner. The Medicare rebate freeze is going to be lifted from July this year and there are now incentives to encourage doctors to bulk bill. Doctors will also be encouraged to prescribe more generic brands of medicine; this alone is tipped to save the taxpayer $1.8 billion.
Earlier this year, a lot of pensioners lost part of their pension and the pensioner concession card because of a change in the assets test. Those of you who did lose your concession card will regain their access to State-based concessions. Also, those people on age and disability support pensions, as well as those who receive parenting payments will receive one-off cash payments of $75 for singles and $125 for couples to help cover your winter energy bills.
Small business owners
If you are a small business owner, this budget is a winner for you. The $20,000 instant tax write-off for assets has been extended for a year to 30 June 2018 and will be open for businesses with a turnover of up to $10 million. The government will also pay States and Territories $300 million over two years to reduce the red tape for small business.
The news is not so good if you’re a property investor. You can no longer claim travel costs relating to your investment property. Rules will also be tightened around deprecation of plant and equipment. From today onwards you can only claim deductions if you actually purchased the item yourself. (In the past you were able to claim depreciation for these items if they came with the house you bought).
Another loser in this budget. Foreign investors will no longer be able to claim the primary residence exemption for Capital Gains Tax. Meaning if you lived in a house while in Australia and are no longer an Australian resident for tax purposes, if you sell that house you will need to pay Capital gains Tax. And if you do own property in Australia and leave that property empty for six months, you will be charged a “Ghost Tax” of at least $5000.
And the rest
There has been an increase of 0.5% of the Medicare Levy. The Medicare levy is payable by those with income of $21,655 or over for singles and $36,541 for families, so it affects almost everyone.
University Students will also face a 7.5% hike in fees, to be phased in over four years from 2018, this equates to a maximum increase of $3600 over the four years. The Threshold to repay your HELP debt has also decreased from $51,957 to $42,000, while those with a HELP debt and earning over $119,882 will now pay 10% of their income instead of the current 8%
Parents who choose not to get their children vaccinated will also lose from this budget. They will have $28 wiped from their family tax benefits each fortnight.
And lastly, businesses who employ foreign workers will also be worse off. Small Businesses who employ foreign workers will have to pay $1,200 per year as well as a one-off $3,000 payment. While larger business this will increase to $1,800 and $5,000.
Make an appointment today to speak to one of our friendly accountants about what the changes mean for you. Contact the friendly team today at We All Count on (08) 8531 0577 or firstname.lastname@example.org.
Partner – Murray Bridge
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.