2017 Federal Budget Review

April 28, 2017

What do the changes mean for you?

 

The federal budget was released by the Treasurer, Scott Morrison on Tuesday the 8th of May 2017.


Following the announcement of the budget, the winners are: First Home Buyers, downsizers as well as small business.

 

 

SUMMARY

 

Contributions to Superannuation

From the 1st of July 2018, Individuals aged 65 or older will be able to make non-concessional (af- ter tax) super contributions of up to $300,000, using proceeds from the sale of the family home. This limit will:

• apply on a per person basis be in addition to the ordinary non-concessional contribu- tion cap, and
• be available where the home has been owned for at least 10 years.

 

Unlike other non-concessional contributions, it will not be necessary to meet a work test or have a ‘total super balance’ under $1.6 million. The amount contributed will not be exempt from the assets test used to assess eligibility for the Age Pension.

 

First home super saver scheme

 

From July 1 2017, First home buyers will be able to save for a deposit by making voluntary con- cessional and non-concessional super contributions. Contributions will be limited to $15,000 per year (up to a total of $30,000) and will count towards the relevant contribution cap.

Withdrawals can be made from 1 July 2018. Concessional contributions plus assumed earnings withdrawn will be taxed at the person’s marginal tax rate, less a 30% tax offset.

 

CGT on Foreign Owned Property

 

Effective immediately, foreign property owners will no longer receive the CGT exemption in the principal place of residence. A new CGT rate of 12.5% will apply.

 

Empty Foreign – owned property

 

Foreign owners who leave their property empty for more than six months in a year will pay an annual vacancy charge of at least $5000

 

SMSF borrowings (Proposed- subject to legislation being passed)

 

Broadly, when new limited recourse borrowing arrangements are established, the loan balance will be included in an individual’s ‘total super balance’.The total super balance is used to determine a person’s ability to:

• make non-concessional contributions
• qualify for a Government co-contribution or a spouse contribution tax offset, and
• make catch-up concessional contributions above the annual caps from 1 July 2018, where certain conditions are met.

 

Also, repayments made from the SMSFs accumulation balance will count towards the member’s transfer balance cap, if the borrowing supports a pension account. The transfer balance cap lim- its the total lifetime transfers a person can make to retirement phase pensions.

 

Medicare levy increase

 

From July 1 2019, The Medicare levy will increase from 2% to 2.5% pa to fully fund the National Disability Insurance Scheme.

 

Small business- accelerated depreciation

 

The ability for small businesses with an annual turnover of $10 million or less to claim an immedi- ate deduction for eligible assets costing less than $20,000 each will be extended for 12 months.

 

CGT on Foreign Owned Property

 

Effective immediately, foreign property owners will no longer receive the CGT exemption in the principal place of residence. A new CGT rate of 12.5% will apply.

 

HELP thresholds and rates

 

From July 1 2018 the annual income threshold at which Higher Education Loan Program (HELP) repayments commence will be reduced to $42,000 (currently $54,869). Also, the repayment rate will start at 1% and increase progressively to 10%.

Affordable Housing Capital Gains Tax (CGT)
From January 1 2018, eligible affordable housing will receive a further 10% CGT discount

 

Depreciation

 

According to BMT quantity surveyors, the new rules which are yet to be legislated by Parliament, investors will be able to depreciate new plant and equipment assets within a new property and items they add to their property; however subsequent owners who acquire a property after 9th of May 2017 will not be able to claim depreciation on existing plant and equipment assets.

Investors will still be able to claim qualifying capital works deductions, including any additional capital works carried out by themselves or a previous owner.

 

The budget notes were clear that existing investments will be grandfathered. This means that anyone who has purchased a property up until the 9th of May 2017 will be able to claim depreci- ation as per normal. The new legislation will be in force from 1st of July 2017.

 

If you fall under this category, you can still claim depreciation on plant and equipment assets for both new and second-hand properties.

 

Please reload

Featured Posts

The Dangerous Seduction of Investing In A Holiday Destination

September 15, 2017

1/4