THE 2017/2018 FEDERAL BUDGET

On Tuesday 9 May 2017, the treasurer released the annual budget for 2017-2018. The federal budget includes the expenditure and revenue estimates for the next three years and shows what the governments social and political priorities are and their strategies on how to achieve it.

Here is a quick summary on the positives and negatives on the budget.

Positives

  • The small business instant asset tax write off has been extended. Small businesses who turn over less than $10 million each year were able to write off any assets purchased under $20,000 was set to expire 30 June 2017. This has now been extended to 30 June 2018. Definitely, a great win for small business as they will still continue to get access to the 100% tax deduction of expenditure under $20,000. We still think this should be a permanent tax offset for small businesses!
  • From 1st July 2017, first home buyers are now able to salary sacrifice up to $15,000 a year ($30,000 all up) to their superannuation in which they are able to access for their first home deposit. Finally, the government has made a small step to counter the housing affordability and help assist first home buyers in purchasing their first home. This incentive will allow individuals to save for their home deposit with out it being taxed by the personal income tax rates which can be up to 45%.
  • Older Australians will be getting a one off $75 power rebate in 2016-17.
  • Older Australians over 65 years old are also able to sell their homes and contribute up to $300,000 of the sale proceeds into their superannuation fund.
  • The government has reaffirmed that the company tax rate has dropped to 27.5% and will gradually drop to 25% in the next few years. All small business with turnover under $10 million will be able to access the lower company tax rate.
  • As highlighted by the government earlier, they have increased the turnover threshold for small businesses from $2 million to $10 million to elect to report GST on a cash basis rather than accrual. Reporting on a cash basis can greatly help all businesses with their cashflow.

Negatives

  • On July 1 2019, Medicare Levy is increasing from 2% to 2.5% of taxable income to help fund the $22 billion National Disability Insurance Scheme. The Medicare Levy is imposed on taxpayers taxable income and paid on top of your income tax when lodging your income tax return.
  • If you have a HECS debt you will normally need to start repaying your debt when you earn over $55,000 a year. From July 2018, the income threshold in which you are required to pay will reduce from $55,000 to $42,000. Which means that lower income earners will get less money in their pockets as some of it will be used to pay off their HECS debt.

Other highlights on the Budget:

A bank tax of 0.06% was introduced which will only apply to the 5 major banks (CBA, NAB, Westpac, ANZ and Macquarie. However, the banks will most likely pass this costs to the customers or shareholders.

This years budget has put foreigners at a major disadvantage in terms of visas, property, and employment:

  • In March 2018, all temporary work visas will cost small businesses $1200 per year and a one-off $3,000 payment. For larger businesses, it will cost $1800 per year and one-off $5,000.
  • Foreign investors will have to pay a ghost tax of more than $5,000 for properties left vacant for at least six months in the year.
  • The main residence exemption for foreign investors in Australia is being removed. Thus, foreign investors will now be required to pay capital gains tax when selling a main residence.
  • Foreign ownership of new developments are now capped at 50%.

For further information feel free to contact us and visit the budget website here.
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