First Home Super Saver Scheme
First home buyers will be able to boost house deposit savings by contributing into their super accounts.
The Government is proposing that from 1 July 2018, first home buyers will be able to withdraw voluntary contributions (both before or after tax) deposited into their super funds, made from 1 July 2017, to contribute to a house deposit.
Tax will apply to withdrawals at marginal tax rates less a 30% offset. A deemed earning rate will also be applied to withdrawals by the Australian Taxation Office.
Contributions into a super fund will be allowed by voluntarily making extra contributions (both before or after tax) up to a maximum of $15,000 per person per year, and to a maximum of $30,000 in total. Both members of a couple will be able to take advantage of this measure for the same house deposit, bringing the maximum savings to $60,000 in total.
Incentive to downsize family home for retirees
From 1 July 2018, the Government will allow retirees aged 65 or over who sell their home to contribute the proceeds of the sale into their super account/s. This non-concessional (after tax) contribution of up to $300,000 per person will be allowed in addition to the current contributions rules and caps. It will also be exempt from the rules that preclude those over 65 from contributing funds into super.
It is not exempt, however, from the Age Pension Assets test or the $1.6 million Transfer Balance Cap (which limits the amount of money you can put into a pension account where the earnings are tax free). Any amounts over the balance limit will need to stay in a super account, not a pension account.
The measure will apply to sales of a principal place of residence owned for 10 years or more. Both members of a couple will be able to take advantage of this measure for the same home, meaning proceeds of up to $600,000 can be transferred into super for a couple.
Medicare levy to be increased to 2.5% from 1 July 2019
From 1 July 2019, the Government will increase the Medicare levy to 2.5% (up 0.5% from the current 2%).
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 place.
Higher Education Loan Program (HELP) changes
The ‘Higher Education Reform Package’ will take effect from 1 January 2018, and will include the following measures:
- A new set of repayment thresholds will be introduced from 1 July 2018, to change the timing and quantity of repayments
- The minimum repayment income threshold will be reduced from 1 July 2018 from $55,874 to $42,000, with the repayment rate lowered from 4% to 1%
- The maximum repayment threshold will be increased from 1 July 2018 from $101,900 to $119,882 , with the repayment rate increased from 8% to 10%
- Maximum student contributions will increase
- Up-front fees and deregulation of fees will be ruled out
- Phasing in a maximum student contributions increase by 1.8% per year between 2018-2021
- Indexing HELP repayment thresholds to be linked to the Consumer Price Index, rather than the Average Week Earnings from 1 July 2019
From March 2018, businesses that employ foreign workers on certain skilled visas will be required to pay a levy. This will enable the creation of a ‘Skilling Australians Fund’, designed to provide apprenticeships and traineeships for occupations that:
- Are in high demand
- Rely on skilled migration pathways, industries and sectors of future growth
- Can provide trade apprenticeships and apprenticeships/traineeships in regional and rural areas
New residency requirements for Age Pension eligibility
From 1 July 2018, non-Australians who have retired in Australia, will be restricted from gaining access to the Age Pension or Disability Support Pension.
Anyone claiming the Age Pension and/or the Disability Support Pension will need to have either:
Resided in Australia continuously for 15 years
Resided in Australia continuously for 10 years, with five years of this residence being during their working life (16 years of age to Age Pension age)
Or have 10 years continuous Australian residence, without having received an activity tested income support payment for a total period of five years
Property owners and investors
There were a range of measures proposed in the Budget for property owners and investors, as follows:
- GST payable on newly constructed properties will now be remitted by the purchaser of the property rather than the developer. This is to combat non-payment by developers, and it should encourage the payment to take place as part of the property settlement
- Property investors will no longer be able to claim depreciation deductions for some items (dish washers, ceiling fans, etc.) purchased by previous owners of the property. The acquisition of these existing items will instead form part of the cost base of the property (for CGT purposes) for subsequent investors
- Investment property owners will no longer be able to claim tax deductions for travel expenses to inspect, maintain or collect rent for their property
- Property investors who invest in affordable housing that is rented with a lower than market rate of rent and managed through a registered community housing provider, will be eligible for an increased CGT discount rate of 60% upon the sale of their property
Small business owners
Good news for business owners – the Government has recommitted to its 10 year Enterprise Tax Plan. This includes a reduction in corporate tax rates for businesses that have a turnover of less than $50 million, to 25% by the 2026-27 financial year. The Enterprise Tax Plan Bill has been passed by the Senate.
For small businesses, the current instant asset write off concession of $20,000 will be extended to the 2017-18 financial year.
Please remember that unless stated otherwise, changes announced in the Budget are proposed changes only until legislated. To speak to a Financial Planner about how these changes may affect you, call BUSSQ on 1800 MY BUSSQ (1800 692 877).
To see the full Federal Budget, go to budget.gov.au.
A Budget update for employers is available here.
Proposed measures announced in last year's Budget have been legislated. These measures include:
CONCESSIONAL (BEFORE TAX) CONTRIBUTIONS CAP REDUCED TO $25,000. This limit was $30,000 for those under 49 and $35,000 for those 49 or over.
CONCESSIONAL (BEFORE TAX) CONTRIBUTIONS CATCH-UP FOR BALANCES UNDER $500,000. People with superannuation balances of $500,000 or less will be able to rollover their unused concessional (before tax) cap amounts within any five year period.
SPOUSE CONTRIBUTIONS TAX OFFSET THRESHOLD WILL INCREASE. The $540 tax offset will be available to any individual who makes a contribution to their spouse, as long as the spouse earns an income less than $37,000.
A TAX OFFSET IS AVAILABLE FOR PEOPLE EARNING LESS THAN $37,000. Individuals with total taxable income up to $37,000 will receive a refund of up to $500 into their superannuation account for the tax paid on their concessional (before tax) contributions.
TRANSITION TO RETIREMENT PENSIONS. The Government will remove the tax exempt status from investments in transition to retirement income streams. Account Based Pensions (retirement accounts) will continue to receive the tax exempt status.
SUPER PENSIONS. The Government will introduce a $1.6 million transfer balance cap on the total amount of accumulated superannuation an individual can transfer into an account based Pension. Individuals with account based Pension balances over $1.6 million as at 1 July 2017 will be required to roll the excess into a super accumulation account, or withdraw the excess amount.
DEDUCTIONS ON SUPER CONTRIBUTIONS EXPANDED. All individuals up to the age of 75 will be able to claim an income tax deduction for personal contributions to an eligible fund, up to the new $25,000 concessional contribution cap.
To speak to a Financial Planner about how these changes may affect you, call BUSSQ on 1800 MY BUSSQ (1800 692 877).