The Federal Budget 2017
The Federal Treasurer, Scott Morrison, has delivered his second budget for the Liberal National Party (LNP) government and stated that it is focused on boosting the economy and households, so that "we live within our means and are able to return the Budget to balance in 2020/21".
The government is proposing to address the housing affordability crisis with a package of tax, superannuation and other measures. Additionally, the Budget contains measures intended to ensure the integrity of the tax and superannuation system.
None of the items contained within the Budget will become law until the Budget is passed by the House of Representatives and the Senate and signed by the Governor General.
Housing affordability measures
- Individuals will be able to make voluntary contributions into their superannuation of up to $15,000 per year and $30,000 in total, to be withdrawn subsequently for a first home deposit. The contributions can be made from 1 July 2017 and must be made within an individual's existing contribution caps. From 1 July 2018 onwards, the individual will be able to withdraw these contributions and their associated deemed earnings for a first home deposit. The withdrawals will be taxed at an individual's marginal tax rate, less a 30% tax offset. Both members of a couple can take advantage of this measure to buy their first home together.
- 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, if they have owned their principal residence for at least 10 years. It is available to both members of a couple for the same home. These contributions are in addition to existing rules and caps and are exempt from the age test, work test and the $1.6m total superannuation balance test for making non-concessional contributions.
- Deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed 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. The conditions to access the 60% discount are:
- the housing must be provided to low to moderate income tenants
- rent must be charged at a discount below the private rental market rate
- the affordable housing must be managed through a registered community housing provider,
- the investment must be held for a minimum period of three years.
- Foreign and temporary tax residents will be denied access to the CGT main residence exemption from 7.30pm on 9 May 2017. Existing properties held before this date will be grandfathered until 30 June 2019.
Tax integrity measures
- The multinational anti-avoidance law will be amended to prevent the use of foreign trusts and partnerships in corporate structures for tax minimisation, with retrospective effect from 1 January 2016.
- The taxable payments reporting system will be extended to contractors in the courier and cleaning industries from 1 July 2018.
- Sales suppression technology and software, used to understate business income by deleting electronic transactions, will be prohibited.
- Access to the small business CGT concessions will be tightened from 1 July 2017 to deny eligibility for assets which are unrelated to the 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.
- 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. Businesses with turnover of less than $10m per year will be required to make an upfront payment of $1,200 per visa per year for each employee on a Temporary Skill Shortage visa and make a one-off payment of $3,000 for each employee being sponsored for a permanent Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa. The levy will replace the current training benchmark financial obligations for employers of workers on Temporary Work (Skilled) (subclass 457) visas, which are being abolished, and permanent Employer Nomination Scheme (subclass 186) Direct Entry stream visas.
- 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.
- The GST treatment of digital currency (such as Bitcoin) will be aligned with that of money from 1 July 2017.
- The use of limited recourse borrowing arrangements (LRBAs) will be included in a member's total superannuation balance and transfer balance cap from 1 July 2017. LRBAs can be used to circumvent contribution caps and effectively transfer growth in assets from the accumulation phase to the retirement phase that is not captured by the transfer balance cap. The outstanding balance of an LRBA will now be included in a member's annual total superannuation balance and the repayment of the principal and interest of an LRBA from a member's accumulation account will be a credit in the member's transfer balance account.
- Opportunities for members to use related party transactions on non-commercial terms to increase superannuation savings will be reduced from 1 July 2018.
- 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.
- The Medicare levy low-income thresholds for singles, families, and seniors and pensioners will increase from the 2016/17 income year as follows:
- Singles will increase to $21,655 (up from $21,335 for the 2015/16 year).
- Family will increase to $36,541 (up from $36,001 for the 2015/16 year).
- Single seniors and pensioners, the threshold will increase to $34,244 (up from $33,738 for the 2015/16 year).
- Family threshold for seniors and pensioners will increase to $47,670 (up from $46,966 for the 2015/16 year).
- Child-student component of the income threshold for all families will increase to $3,356 (up from $3,306 for the 2015/16 year).
- A new HELP debt minimum repayment threshold of $42,000 will be established with a 1% repayment rate. Currently, the minimum repayment threshold for the 2017/18 year is $55,874 with a repayment rate of 4%. A maximum threshold of $119,882 with a 10% repayment rate will also be introduced. Currently, the maximum repayment threshold for the 2017/18 year is $103,766 with a repayment rate of 8%.