2017 FEDERAL BUDGET REVIEW
The 2017 Federal Budget, delivered by Treasurer Scott Morrison on 9 May 2017, was (in a nutshell) restrained. The government’s key message was; ‘stronger growth, guaranteeing essential services, and tackling the rising costs of living’.
Containing a number of ‘big ticket’ items at its core, this budget is relatively benign in its impact on most of us. However, the most polarising issues came from announcements made before the Budget was brought down – which means we now have some more information to analyse.
But like all Budgets before – the devil will be in the detail, and much of the concrete outcomes will not be known in their entirety until the relevant legislation is introduced into parliament. Once the bills are tabled, it becomes another matter of having the legislation passed into law. Having the bills passed in the Senate could be challenging given its current makeup.
This article is not intended to be an exhaustive list of all the measures announced in the budget. Readers are encouraged to seek their own professional advice in relation to matters of specific interest.
So, let’s consider the key measures:
The government is predicting a return to surplus by 2020-21. The deficit for 2017-18 is forecast to be $20.4bn, but following that comes a projected surplus in 2020-21 of $7.4bn.
Economic growth is forecast to improve – with growth of 3% per annum predicted from 2018-19.
As predicted in the lead-up – housing affordability has been confirmed as one of the major components of this year’s budget.
Some of the measures announced this year include:
• Penalties for foreigners owning property that is not occupied, or not genuinely available for rent for at least six months per year.
• From 1 July 2017, tax deductions for travel costs associated with inspecting and maintaining residential rental properties and collecting rental payments will be abolished.
• In addition to tax concessions for investments in Managed Investment Trusts (MITs) that invest in affordable housing – individuals who invest in affordable housing will be entitled to tax concessions. This will apply from 1 January 2018.
• The foreign ownership of new developments will be capped at a maximum of 50%. This will ensure that Australians have ready access to purchase newly built residential property.
An additional two housing affordability initiatives are dealt with in our discussion on Superannuation below.
The Budget contained a number of taxation measures directed both at individual taxpayers and small businesses. They include:
• The Medicare levy will be increased from 2% to 2.5% from 1 July 2019. This measure will ensure full funding for the National Disability Insurance Scheme.
• Low-income earners are exempt from paying the Medicare levy. The income thresholds (below which the Medicare levy is not payable), will see a modest increase.
• The Temporary Budget Repair levy, payable by higher income earners, will expire on 30 June 2017 as previously announced.
• The accelerated tax deductibility for assets costing less than $20,000, announced in the 2015-16 Budget and for businesses with aggregate turnover of less than $10m, will be extended until 30 June 2018.
With superannuation receiving so much attention in the 2016 Budget there was not much in terms of unexpected news. However, there were a couple of important announcements:
• The First Home Super Saver Scheme will allow first homebuyers to withdraw voluntary contributions they make to superannuation (along with associated earnings) to be used towards a deposit for their first home. The maximum amount that can be contributed, and later withdrawn, is $15,000 per annum, with an overall maximum limit of $30,000 per person. The scheme applies to contributions made from 1 July 2017 and withdrawals can be made from 1 July 2018.
• As previously announced by the government – a change in the way self-managed super funds that borrow for investments, is being made. This will impact on the calculation of an individual’s ‘total superannuation balance’ and the amount that can be held in a pension account.
• As part of the government’s overall housing affordability measures, Australians aged 65 and over who sell their family home (one that they have lived in for at least ten years), will be able to contribute up to $300,000 of the sale proceeds to superannuation without being constrained by current superannuation limits, and needing to meet a ‘work test’. This will apply from 1 July 2018.
As announced in the lead up to the Budget – the government has confirmed its intentions to substantially increase funding for schools.
Another expected announcement were the changes set to reform funding of higher education – with additional modifications announced for the government’s Higher Education Loan Program (HELP).
The proposed changes will see HELP contributions being subject to a lower threshold. From July 2018 students will be required to start paying back their loans when their income reaches $42,000 per year.
Aged care, social security, and health
The Budget contained a number of announcements in relation to aged care, social security, and health care.
Some of the measures announced included:
• Additional funding to extend the Commonwealth Home Support Program and Regional Assessment Service.
• Changes to the Australian residency requirements for those applying for the Age Pension and Disability Support Pension.
• Pensioners who lost their Pensioner Concession Card as a result of the changes to the assets test that took effect from 1 January 2017, will now have it reinstated.
• The Budget will provide an additional $1.8bn for new and amended listings under the Pharmaceutical Benefits Scheme (PBS).
While this is not an exhaustive list of the measures announced in the Budget, this summary provides you with an overview of the key changes that are most likely to impact all Australians.
It was also announced that this year’s Budget will include significant spending on infrastructure and renewable energy projects that will not only be good for the country, but may also provide ongoing investments and employment opportunities nationwide.
By Peter Kelly – Prepare For Life Issue 26 – June 2017