Each year the Federal Budget comes out with increasing fanfare and commentary from various sectors of the community due to Political parties and politicians themselves under every increasing scrutiny in the digital age.
So what does it mean for you?
We’ve taken what we consider to be just a few of the key issues and briefly outlined them for you below to consider.
Medicare levy-related changes:
The increase in the levy (tax) has been touted as prudent economic management by various media commentators to cover the increasing financial burden an aging population places upon the community as well as manage the projected costs for the NDIS.
The changes are outlined below from the 2017 income year onward:
Medicare Levy low-income thresholds
- Singles: increased to $21,655
- Families: increased to $36,541 plus $3,356 for each dependent (child/student)
- Single seniors and pensioners: increased to $34,244
- Family seniors and pensioners: increased to $47,670 plus $3,356 for each dependent (child/student)
Increases in the Medicare levy itself occur from 1 July 2019 from 2% to 2.5% of taxable income.
Extension of the $20,000 immediate write-off for small business:
Originally this generous concession was designed to end on the 30th of June this year but it has been extended under the budget proposal to the 30th of June 2018.
We often receive a lot of questions about this concession and there are certain rules you need to consider before deciding to make a purchase.
It can have unforeseen consequences if you purchase an asset and it doesn’t qualify for the concession and I would recommend contacting us prior to committing to any significant asset purchase.
Remember also that at this stage the budget hasn’t gone through parliament so as it stands the original deadline remains until the proposed measures receive royal ascent.
This is a particularly interesting change set to commence from 1 July 2017 that will affect decisions regarding investment in existing properties. It’s a small measure designed in part to appease the ever-growing dissatisfaction community sectors have with negative gearing.
The Government has proposed limiting the depreciation deductions available to investors who purchase existing properties in that a buyer will now be unable to claim a depreciation expense for existing assets contained within a property (i.e. dishwashers, air-conditioning units etc).
Often when a client purchases an existing investment property they obtain a Depro report which allocates a cost to depreciable assets contained within a house. The proposed changes eliminate an investor’s ability to claim this depreciation expense unless the dwelling is new.
There is a grandfather date being the 9th of May 2017 so all agreements entered prior to this date and existing properties utilising the previous claims will be unaffected.
It is worth remembering that any new asset you purchase for a rental property can still be claimed under the capital works and allowances regimes.
First home owner superannuation saver scheme
This sounded extremely generous upon its announcement but as always the devil is in the detail.
From 1 July 2017, you can make voluntary contributions up to $15,000 per year (to a limit of $30,000 in total across financial years) to your nominated superannuation fund.
I would note the following:
- The amounts contribution must remain within the existing concessional and non-concessional caps (this measure is non-on-top of the existing caps);
- You can salary sacrifice the amounts;
- The contributions are still taxed within the superannuation fund at 15%;
- Amounts contributed can be withdrawn from 1 July 2018 for the sole purpose of acquiring a first home; and
- Withdrawn amounts are taxed at individual marginal tax rates but the individual will receive a 30% tax credit. If the amount was a non-concessional contribution, then it won’t be taxed and you won’t receive the tax credit.
So, upon reading that you will realise it isn’t really as generous as they made it sound but you will accumulate greater savings on average than those currently offered by standard investments in my opinion.
The points above are just a few I have cherry-picked for people to consider as they are the current “hot topics” but it is worth remembering that the budget contains a significant more not detailed here.
If you have any concerns about the budget and how it will affect you, your family and/or your business please contact our staff to discuss your concerns.