What the 2017 Federal Budget means for you

Treasurer Morrison brought down his second budget last night. The measures propose to bring the budget to surplus by 2020-21. We are pleased to present you with some highlights that will impact you, our valued clients.

The $20,000 asset write-off for small business has been extended for one year however there are otherwise limited changes impacting small businesses and no news on tax reform. A crack down on the deductions available for rental property owners is offset somewhat by an increase in the CGT discount for investment in qualifying affordable housing.

The highlights are set out below.

Housing affordability measures

• A limited amount of an individual’s superannuation contributions made from 1 July 2017 may be withdrawn from 1 July 2018 onwards for a first home deposit.
• A person aged 65 or over can contribute up to $300,000 from the proceeds of the sale of their home as a non-concessional 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.
• The CGT discount for Australian resident individuals investing in qualifying affordable housing will be increased from 50% to 60% 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% and will apply to Australian real property and related interests valued at $750,000 or more.

Tax integrity measures

• The taxable payments reporting system will be extended to contractors in the courier and cleaning industries from 1 July 2018.

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 $10m.

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.

Individuals

• The Medicare levy will be increased from 2.0% to 2.5% 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.
• A new set of repayment thresholds and rates under the higher education loan program (HELP) will be introduced from 1 July 2018.

Other tax changes

• Businesses that employ foreign workers on certain skilled visas will be required to pay a levy that will provide revenue for a new Skilling Australians Fund from March 2018.

For a detailed Tax and Accounting Overview on the 2017 budget click here.

We will be discussing these changes with many of our clients as part of year-end tax planning. If you would like further information or to book an appointment to discuss the impact on your personal situation please contact us.