Federal Budget 2017-2018
Extending the $20,000 immediate write-off for small business….
The government announced that it will extended the immediate deductibility rules allowing small business an immediate write-off for eligible assets purchased for less than $20,000.
This means small businesses (with aggregated turnover up to $10 million) will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2018. From 1st July 2018 the immediate deductibility threshold will revert back to $1,000.
This is great news and will provide a significant boost to small businesses.
Investors take a hit……
Effective from 1st July 2017 the government will no longer allow deduction for travel expenses relating to inspecting, maintaining or collecting rent for a residential rental property. This has come about as a result of the government questioning the integrity of many taxpayers’ claims without correctly apportioning private costs. Purchasing a residential investment property after 9th May 2017 will also see the ability to claim depreciation on plant and equipment previously installed no longer claimable. What this means is that if you purchase a residential investment property after 9th May 2017 you will be only able to claim the deprecation on assets you purchase like carpet, ovens, dishwashers, ceiling fans etc. This does not affect the ability to claim on capital works deprecation (the building).
First home superannuation saver scheme….
Good news for First home buyers with the superannuation saver scheme, this scheme will enable first home buyers to be able to make voluntary contributions of up to $15,000 per year – and $30,000 in total into their superannuation account to purchase a first home. Concessional contributions and associated deemed earnings will be taxed at 15 per cent. Non-concessional (post-tax) contributions will not be taxed, nor will withdrawals of non-concessional amounts. These voluntary contributions, along with associated deemed earnings, will be able to be withdrawn for a first home deposit from 1 July 2018. Withdrawals of concessional contributions and earnings will be taxed at the individual’s marginal rate less a 30 per cent offset.
The childcare rebate will now be limited to families with incomes below $350,000 per year.
Aged and downsizing
This will offer some comfort to our aged, from 1st July 2018 the Government will allow a persons aged 65 or over to make a non-concessional contributions (post-tax) into their superannuation funds of up to $300,000 (each) from the proceeds of selling their home. These NCCs will be in addition to those currently allowed under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance test for making NCCs.
This measure will apply to sales of a principal residence owned for the past ten or more years and both members of a couple will be able to take advantage of this measure for the same home ($300,000 each)
Note: It is unclear at the moment how this measure will affect the assets test for aged pension purposes.
Changes to Higher Education Loan Program
Our students may feel the pinch a bit earlier than anticipated with the changes affecting HELP debts repayment thresholds. The government is to revise the repayment thresholds from 1St July 2018, as a result the threshold will be $42,000 (previously $55,874) with a 1% repayment rate and a maximum threshold of $119,882 with a 10% repayment rate.
Medicare to rise
The Medicare levy will increase from 1st July 2019 from 2% to 2.5% on taxable income. It is expected that other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also increase. Low-income earners will continue to receive relief from the Medicare levy through the low-income thresholds for singles, families, seniors and pensioners. The current exemptions from the Medicare levy will also remain in unchanged.
Taxable Payment reporting extended.
The taxable payment reporting system (TPRS) will now include contractor couriers and cleaning industries, they join the current reporting requirements for the building industry. This reporting measure was originally implemented for the building industry in order to provide transparency and improve contractor compliance (and facilitate data matching) The TPRS requires the reporting of individual and total payments to all contractor’s during the year……this has now been extended to included courier’s and cleaning industries.
The Treasurer announced that, from 1 July 2018, purchasers of newly constructed residential properties or new subdivisions will be required to remit the GST directly to the ATO as part of settlement. As most purchasers use conveyancing services to complete their purchase, they should experience minimal impact from these changes.
This levy is rather controversial, the government has the intention of implementing a bank levy of 0.06% p/a on liabilities exceeding $100 million, this will be a new tax, but as it early days it is unclear at this stage how this will be treated. I have no doubt we as consumers will pay for this.
Please note that the dates detailed are the proposed dates if the legislations passes through parliament.