The Federal Budget In a Nutshell
May 11, 2017
As most are no doubt aware, the Federal Treasurer, Scott Morrison (or ScoMo as he’s been labelled on social media!) handed down the government’s budget for the 2017-18 year earlier this week. Much of the media commentary tends to focus on the political angle of course, and the number of years until the government coffers are expected to return to surplus (for those interested, they predict a surplus in 2020-21, a vast improvement on the expected deficit of close to $30b next year).
There were of course the usual key announcements around infrastructure funding, welfare, tourism and foreign affairs. Most of those measures tend to have very little, if any impact on the typical suburban taxpayer or household. We’ve trawled through the budget papers (ok, we trawled through a summary of them), and summarised some of the key points announced by ScoMo that might affect you. They are as follows:
- All tax payers subject to the Medicare levy (that’s most workers) will pay an additional 0.5% in income tax from 1 July 2017. For a worker earning $80,000 per annum, this equates to $400 per year. The revenue from this measure will help to fund a shortfall in the National Disability Insurance Scheme.
- While many expected a bigger focus on housing affordability, there appears to be only one key measure introduced to tackle this issue. But it appears to be a good one. First home-buyers will be able to salary sacrifice into superannuation (where their income will be taxed at a lower rate) for the purpose of saving for a deposit on their first home. This will be capped at $15k per annum, and $30k in total.
- Retirees aged 65 or over wishing to downsize their home will be able to make a one-off, non-concessional (that’s after-tax) contribution to superannuation of up to $300k per person ($600k for a couple) if they sell their home they’ve owned for more than 10 years. This measure is aimed at boosting superannuation savings, and freeing up housing for younger people, and will take effect from 1 July 2018.
- University students (past and present) with a HECS or HELP debt will now begin to repay those loans when their income exceeds $42k per annum, well down on the current threshold of approximately $55k. However a reduced repayment rate will apply to the lower thresholds.
- Small Business will continue to benefit from the $20k instant write-off for asset purchases, with that initiative extended for a further 12 months, until 30 June 2018. The turnover threshold for this has been increased from $2m to $10m.
- Many will be pleased to see the big banks having to cough up, with a new levy on bank deposits introduced that’s expected to earn the government a tidy $6bn per annum in revenue.
- Many expected the government to further tackle housing affordability by cracking down on property investors who take advantage of negative gearing. This was largely overlooked, with some token measures introduced around deductibility of certain expenses such as travel, but nothing really significant.
- Company tax cuts introduced in the previous budget will continue, with the tax rate for entities with turnover of less than $10m dropping from 28.5% to 27.5% in 2017-18. This will be extended to businesses with turnover of less than $25m for the 2017-18 year, and $50m for the 2018-19 year.
- Finally, to finish on somewhat of a lighter note, the Treasurer announced that new applicants for Newstart Allowance and some other Centrelink benefits will be drug tested. It’s hard to argue with that.
It’s important of course to bear in mind that none of these measures are guaranteed, they need to pass through both houses of parliament first. However, there doesn’t appear to be anything in the list above that’s particularly controversial, so we can probably expect to see these measures implemented. It’s unlikely any opposition would stand in the way of a government risking voter backlash by increasing taxes!
Overall, the government has attracted a fair whack of criticism already for introducing what many see as a ‘Labour government’ type budget, with a focus on increased taxes. Respected financial commentator Terry McCrann has bemoaned the focus on tax increases for the average Australian, while opposition leader Bill Shorten says the budget delivers a tax cut for millionaires and a tax hike for every worker. Time will tell how it’s received by the public, but initial indications aren’t great for the government.
The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should consider your own financial position, objectives and requirements and seek personalised advice before making any financial decisions.