Here’s our budget low-down!
School Students and Teachers
The Federal Government will give schools an extra $18.6 billion over 10 years which is great and they are also standardising funding allocation now meaning approximately 51 private and catholic schools funding will be cut or frozen. Around 24 elite private school have been identified by the government as being overfunded however only two of these are in Queensland being Cannon Hill Anglican College and Hillbrook Anglican School. The rest are all in NSW and ACT!
Translation – if your child attends a private school expect your fees to go up next year to cover their funding gap.
If you’d like to check out if your school is affected, see the below link, it’s easy to us and very interesting.
On the upside, needs-basis funding means that over 9,000 schools are set to receive a significant funding boost and that will have a real impact on our community providing more resources for our kids, more teachers and teacher aide hours and a better quality of education across the country!
National Disability Insurance Scheme
This is great too… The NDIS scheme has been fully funded with the money coming from an increase to our Medicare Levy! Yes, it’s more tax we pay but our budget is in deficit and funding the NDIS is important so we’re happy to pay… This is a great measure as many more people will get support under NDIS who previously were not eligible. The increased Medicare Levy will not start until 1 July 2019.
The Government is looking to extend the $20,000 immediate write-off for small businesses by a further 12 months through to 30 June 2018. The concession will be available for businesses with an annual turnover less than $10 million.
Assets purchased for more than $20,000 can continue to be pooled and depreciated at 15% in the first year and 30% in following years.
At this stage, the immediate write-off threshold will go back to $1,000 from 1 July 2018, however there is the possibility that the Government will extend this date again.
If you lost your pensioner concession card as a result of the asset test, you'll have this benefit restored. Older Australians will also get a one-off $75 power rebate.
For those 65 and over, the Government will now allow you to make a non-concessional contribution into super of up to $300,000 from the proceeds of selling your home should you wish to downsize. This is in addition to the existing superannuation contribution caps.
Both members of a couple will be allowed to take advantage of this concession, so a couple could potentially make a non-concessional contribution of up to $600,000 for a property held jointly. The fine print - to be eligible you must have owned your property for at least ten years and any sale proceeds contributed under this measure will still count towards the Age Pension assets test.
Patients out of pocket expenses should be lower after this budget, with the freeze being lifted on Medicare rebates providing more incentive for GP's to bulk bill children, pensioners and concession card holders. The lift will slowly happen over the next three years though and will be dependent on the service provided.
Low Income Earners
The Government will increase the Medicare levy low-income thresholds for singles, families, seniors and pensioners from the 2017 income year. The threshold will increase to $21,655 for singles and $36,541 for families, plus $3,356 for each dependent.
From 1 January 2018, the Government will increase the CGT discount from 50% to 60% for those investing in qualifying affordable housing.
To qualify for the higher CGT discount, the housing has to be provided to low-to-moderate income tenants, and rent has to be charged at a discount to the private rental market rate. The affordable housing must be managed through a registered community housing provider and the investment needs to be held for a minimum of three years.
Key points for primary producers:
$1 billion in Landcare funding has been locked in for five years.
Food importers face stricter requirements including evidence requirements and an ability to have products held at the border.
Farm Household Allowance is still capped at three years, but maxed out farmers can now apply for concessional loans.
Live export industry gets $8.3 million to develop a new welfare assurance program
Significant investment of $8.4 billion has been allocated to the Inland Rail Network in order to move goods faster and cheaper. 1,700km of freight rail network will be laid between Melbourne and Brisbane and is set to start next financial year by the Australian Rail Track Corporations.
Also relevant is the abolishment of a 2014 budget initiative having the GRDC (Grains Research & Development Corporation) pay their own membership fees for International Commodities Organisations. The Commonwealth will keep paying those fees at a cost of $1.8 million per year combined between the FRDC and GRDC.
First Home Buyers
First home buyers can salary sacrifice into their super fund from 1 July 2017 to help save for a house deposit with it being taxed at the same concessional rats as super funds. The saved funds can then be withdrawn from 1 July 2018, which will attract a 30% tax offset.
Translation – you can contribute a maximum of $15,000 per year and $30,000 in total meaning a couple using this strategy could save $60,000 via salary sacrifice in only two years to go towards their first home if they have the spare cash and can survive in the meantime.
Might be time to move back home with Mum and Dad to take advantage of this one! Sorry Mum and Dad..
The AFP will get an extra 300 staff, including Negotiators, Tactical Response Officers, Bomb Squad Technicians and Forensic Specialists. It's part of a $321 million boost to their budget. ASIO has also seen a boost in their budget however the increase is being kept secret!!!
An increase of 0.5% to the Medicare Levy will take this to 2.5% of our taxable income for individuals. This increase will primarily help fund the $22 billion needed for the NDIS Scheme. You will see this kick in 1 July 2019.
Rental Property Owners
From 1 July 2017, the Government will limit depreciation deductions for rental property owners to costs actually incurred by the owner themselves. This means that rental property owners will be unable to claim deductions for plant and equipment purchased by previous owners of the property usually seen in depreciation reports.
This will not affect any arrangements already in place prior to 9 May 2017.
In addition, from 1 July 2017 the Government will no longer allow rental property owners to claim deductions for travel expenses related to inspecting, maintaining or collecting rent.
Translation – available depreciation on rental properties isn’t as attractive as it once was and no more tax deductible trips to visit or inspect investment properties either. We think this means that depreciation reports are now far less attractive with only special building write off available going forward.
The big banks are getting hit on a number of fronts as the Treasurer works to level the playing field. The biggest is a 0.06% Levy - essentially a new tax commencing 1 July however we’re concerned that borrowers and shareholders will ultimately bare the cost of this one! At the end of the day though, the budget deficit needs to be clawed back and we haven’t spoken to many people who are unhappy with this measure.
Translation – It may mean your superannuation invested in blue chip bank stocks may take a hit in the short term however markets bounce back in time. Direct shareholders may not continue to enjoy those high yielding dividend payments that they have become accustomed to and interest rates may continue to increase slightly too. We think many will turn to the smaller banks to avoid the issue which will again put even more pressure on the bank’s profits.
The affected banks are CBA, Westpac, NAB, ANZ and Macquarie.
University fees are on the rise which is a shame as education is so crucial and Australia has a long way to go in this area! Students will have to pay an extra $2,000 to $3,600 for a four-year course. That's a fee increase of 1.8 per cent next year, and 7.5 per cent by 2022.
The income level at which you will have to start repaying your HECS debt will also be reduced if it is passed. The new threshold will sit at $42,000 however the HECS repayment required at that level isn’t huge at only 1%.
Australian permanent residents and most New Zealand citizens will no longer be able to apply for Commonwealth supported university places either.
Foreigners and their Employers
There are a bunch of measurers tightening the financial landscape for foreigners and their employers:
Employers will have to pay a levy for foreign workers on some skilled visas. Businesses with a turnover less than $10 million will make an upfront payment of $1,200 a year for each employee on a Temporary Skill Shortage visa, and a one-off payment of $3,000 for each employee being sponsored for a permanent Employer Nomination Scheme visa or a permanent Regional Sponsored Migration Scheme visa.
The Government will deny foreign residents access to the CGT main residence exemption from 9 May 2017. Existing properties held prior to this date will only be grandfathered until 30 June 2019.
Foreign investors are being slugged with an extra charge for properties left vacant and there will be an increase in their application fees too.
Foreign ownership of new developments will be capped at 50 per cent.
Contributing more than $360 million to the budget over the next four years are the roll-your-own tobacco or cigars smokers, bringing them into line with the tax rates on cigarettes. This will be phased in, so time to take action, save some cash and kick those bad habits!
Those who decide not to vaccinate their children will lose an estimated $28 per child per fortnight. This will be withheld from their Family Tax Benefit Part A payments and is expected to surmount to $66 million.
Welfare payments will be consolidated and 5,000 new recipients will be subject to random drug testing as a trial. Those who test positive will have their payments quarantined. It is also expected that 450 people each year will be barred from claiming the Disability Support Pension on the basis of drug and alcohol abuse. Changes to Newstart and Sickness Allowance recipients and requirements of approved activities have been announced and the cashless debit card will also be introduced in two new locations.
Property developers will no longer manage the GST collected on sales of new residential properties or new subdivisions. Instead, the Government will require GST to be remitted directly to the ATO as part of the settlement process.
Cleaners and Couriers will no longer fly under the radar with the Government extending the Taxable Payments Reporting System (TPRS) to contractors in the courier and cleaning industries from 1 July 2018. Under the TPRS, businesses are required to report details of payments they make to contractors each year to the ATO.
Businesses in these industries will need to ensure that they keep track of contractor information (ABN, Name, Address, Gross Payments and GST Paid) in order to comply with this new reporting requirement.
Defence will get $34.6 billion in 2017-18 and $150.6 billion over the forward estimates. That is in line with expectations, and maintains what the Government calls a ‘stable and sustainable’ funding growth path.
Defence spending is on track to hit 2 per cent of GDP by 2020-21 — three years earlier than the Government promised back in 2013. Defence consultants and contractors will lose out though — their numbers are set to be cut and overseas and business travel will also be limited.
Operation Sovereign Borders will continue to get the funding it needs to "stop the boats".
We are very happy to see funding to support our troops too whether currently serving or retired.
If you'd like to discuss how the budget impacts you personally, get in touch with Vanessa Mendes, Partner of HM Business Partners - Goondiwindi on 0414 246 014 to catch up for a coffee.