Considered Value

Issue 114 - Budget Edition (May 2017)

2017/18 Federal Budget Highlights

The Federal Budget for the 2017/18 year was handed down by the Treasurer on 9 May 2017.

We will be considering how these affect each client's individual circumstances and have summarised below the main taxation and superannuation highlights.

These announcements are not yet legislated.

Medicare Levy

The Medicare levy will increase from 2% to 2.5% from the 1st of July 2019. This increase will be used to support the National Disability Insurance Scheme.

Medicare Levy low income threshold

Individuals on a low income will continue to receive relief from the Medicare Levy with no levy payable for singles earning up to $21,655 or couples earning up to $36,541 for the 2016/17 financial year.
The threshold for seniors and pensioners will increase to $34,244 for singles and $47,670 for couples. Families with dependent children and students are allowed an additional $3,356 per child or student.

The Medicare levy is then phased in just above these levels.

Business Levy for employing foreign workers

A new levy will be introduced from March 2018 to be paid by businesses that employ foreign workers on skilled visas. Businesses with turnover of less than $10 million will pay $1,200 per annum per employee on a Temporary Skill Shortage visa and a one-off payment of $3,000 for sponsoring an employee on the Employer Nomination Scheme or the Regional Sponsored Migration Scheme.
The levies for larger businesses are $1,800 and $5,000 respectively.

 Inclusion of Superannuation Fund borrowings in member caps

From the 1st of July 2017, amendments are proposed to the transfer balance cap and total superannuation balance rules for limited recourse borrowings arrangements (LRBAs).

The outstanding balance of an LRBA will now be included in a member's annual total superannuation balance to ensure members cannot use borrowing to increase their balances outside the caps. It had previously been discussed that this measure would only apply for new borrowings but it may now apply to existing loans also.

This will be confirmed once legislation is passed.

Small Business CGT rules to be tightened

The Government has announced tightening of the existing rules for CGT relief for small businesses from the 1st of July 2017.

These are generally available for small business taxpayers with grouped turnover of less than $2 million or net assets of less than $6 million. The announcement concerns situations where taxpayers are involved with larger businesses but are able to structure their affairs so that these businesses are not included in the grouping. Details of how the new rules will work are not yet available and we will be monitoring this when the legislation is drafted.

This is to ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business. 

$20,000 asset immediate deduction for Small Businesses extended

Small business entities (those with a grouped turnover under $10 million) are currently eligible to claim an immediate deduction for depreciation of assets costing less than $20,000 (GST exclusive).
This was due to reduce to $1,000 from the 1st of July 2017 but has been announced to continue until the 30th of June 2018.

Downsizing a home superannuation contributions

The government will be allowing individuals aged 65 or over to make a non-concessional contribution of up to $300,000 from the proceeds of selling their home. These contributions will be outside the current contribution rules and caps and exempt from existing age test, work test and the $1.6 million balance test.

The measure is due to start on the 1st of July 2018 and relates to a principal residence which has been owned for 10 years or more. Both members of a couple can use the $300,000 limit for the sale of the same home.

First home buyer super saver scheme

Any future voluntary contributions to superannuation by first home buyers can be withdrawn, along with the deemed earnings, to assist with a first home deposit. Contributions will be allowed from the 1st of July 2017, with withdrawals allowed from  the 1st of July 2018 onwards.

Any withdrawals will be taxed at the individual's marginal tax rate less a 30% offset. Up to $15,000 can be contributed in any financial year and there is a maximum limit of $30,000. As it's available to individuals, both members of a couple can use these limits to combine for a single deposit.

New residential premises: purchaser to pay GST

Currently developers remit GST on purchases of newly constructed of residential properties (or new subdivisions), however from the 1st of July 2018 purchasers will be required to remit GST directly to the Tax Office as part of settlement.

Affordable housing increased CGT discount

From the 1st of January 2018 the CGT discount on gains relating to investments in qualifying affordable housing will increase from 50% to 60%.

To qualify the housing must be managed by a registered community housing provider and must be held for a minimum of 3 years.

Foreign resident CGT withholding regime expansion

Currently the purchaser of a property over $2 million in value must withhold 10% of the purchase price unless they're provided with evidence that the vendor is an Australian resident.

From  the 1st of July 2017, this threshold is being reduced from $2 million to $750,000 and the withholding rate increased to 12.5%.

Taxable payments reporting system extended to couriers and cleaners

The Courier and Cleaning industries are being added to the taxable payments reporting system. This requires businesses in these industries to provide the ATO with all payments made to contractors every financial year and will commence on the 1st of July 2018, with first annual report due August 2019.

Pensioner concession card

The pensioner concession card will be restored to those who lost it after the pensions asset test was introduced earlier this year. Seniors can now regain access to state and territory based concessions they previously had withdrawn after the change.

Restriction on residential rental property deductions

From the 1st of July 2017, taxpayers will no longer be able to deduct the cost of travelling to their rental properties and will limit "plant and equipment" depreciation to outlays actually incurred by investors.

New HELP repayment thresholds and rates

Changes are to be made to the Higher Education Loan Program (HELP) from the 1st of July 2018.

The changes will start repayments at 1% of adjusted taxable income from $42,000 per annum and increase per the table below:

Government commits to remainder of 10-year package to reduce company tax rate

The Budget confirmed the Government's intention to re-introduce the remaining elements of its 10-year Enterprise Tax Plan.

Legislative amendments already passed by the Senate will see the corporate tax rate reduced for companies with a turnover less than $50 million.

These Senate amendments are set to be approved by the House of Representatives as part of the Budget sittings. The Government said it remains committed to its 10-year Enterprise Tax Plan to eventually reduce the company tax rate to 25% for all companies.

In the 2016–2017 financial year, the reduced corporate tax rate of 27.5% will apply for businesses with an aggregated turnover of less than $10 million; $25 million turnover in 2017–2018; and $50 million turnover from 2018–2019. This effectively implements the first three years of the Government's plan.



Disclaimer: The information provided in this newsletter does not constitute advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances. Brentnalls is not a partnership or a joint venture. Instead, the business of Brentnalls SA is independently owned and operated and it is an independent member of the Brentnalls Affiliation of Accounting Firms. Individual member firms do not accept responsibility or liability for the actions or inactions of any other individual member firm.
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