We realise you’ve probably been bombarded with Budget 2017 information so here’s a brief roundup of some of the key proposals that might affect your financial planning goals — whether you’re starting out in your working life, building a career and family, or enjoying the fruits of your labour in retirement.
Remember, at this stage these are just proposals, not yet law, so they could change as legislation passes through parliament.
If you would like more information on any of the budget outcomes click here to contact your adviser.
First Home Super Saver Scheme
From 1 July 2017, individuals will be able to make voluntary contributions (eg salary sacrifice and non-concessional contributions) of up to $15,000 per year with a maximum contribution of $30,000, to their super account to help with the deposit for a first home. These limits apply to each individual so a couple can contribute up to $30,000 per year and $60,000 in total.
Withdrawals of the contributed amounts along with the deemed earnings will be allowed from 1 July 2018. The withdrawals of concessional contributions and associated earnings will be taxed at the individual’s marginal tax rate, less a 30% tax offset. When non-concessional amounts are withdrawn, they will not be taxed, but we anticipate that the earnings will be taxed at the individual’s marginal tax rate, less a 30% tax offset.
The First Home Super Saver Scheme will be administered by the Australian Tax Office (ATO), which will determine the amount of contributions that can be released and will instruct super funds to make these withdrawals. The ATO will also be responsible for compliance to ensure that people purchase their first home with the money withdrawn from their super fund.
Contributing the proceeds of property downsizing to super
Currently, if you are aged 65 to 75 and want to make voluntary super contributions, you must satisfy a work test. If you are over 75, you are generally unable to contribute to your super.
The government proposes that from 1 July 2018, people aged 65 and over will be able to make a non-concessional contribution to their super fund of up to $300,000 from the proceeds of selling their home, irrespective of their age, work status or total super balance. Couples will be able to take advantage of this measure for a jointly owned home, meaning they can contribute $600,000 to super under this measure.
To be eligible, the property must be a principal place of residence owned for a minimum of 10 years. These contributions will be in addition to any other concessional or non-concessional contributions you may be eligible to make.
Increase to Medicare Levy
The Medicare levy, which is still assessed on taxable income, is proposed to increase from 2% to 2.5% from 1 July 2019.
The increase in the Medicare levy will be used to fund the National Disability Insurance Scheme (NDIS).
Other tax rates that are linked to the top marginal tax rate (ie 47.5% following the increase) will also rise, such as the fringe benefits tax rate.
Residential investment property – disallowance of deduction for travel expenses and limitation on deductible depreciation
From 1 July 2017, travel expenses incurred in inspecting, maintaining or collecting rent on your residential investment properties will no longer be tax deductible. As a residential property investor, you will continue to be able to deduct fees paid to real estate agents or other property managers for these services.
In a separate proposal, depreciation deductions for plant and equipment – such as dishwashers and ceiling fans – in residential investment properties will be limited to the actual expenditure you incur.
Pensioner Concession Card reinstated
Due to the assets test changes that came in on 1 January 2017, some pension recipients were no longer entitled to a payment and as a result lost their Pensioner Concession Card (PCC). At the time those affected were issued with a Low Income Health Card and in some cases, a Commonwealth Seniors Health Card.
Although these cards provide you with access to discounted medication under the Pharmaceutical Benefits Scheme, they don’t provide all the ancillary benefits that the PCC provided.
The government will reinstate the PCC to those who lost their payment as a direct result of the 1 January 2017 asset changes.
One-off energy assistance payment
If you currently receive a qualifying income support payment, you are eligible for a one-off payment of $75 for singles and $125 for couples combined to assist with energy bills. The proposed payment is due to be made on 20 June 2017.
Qualifying payments include the Age Pension, Disability Support Pension, Parenting Payment Single, Veterans’ Service Pension, Veterans’ Income Support Supplement, Veterans’ Disability Payments, War Widow Pension, and permanent impairment payments under the Military Rehabilitation and Compensation Act 2004.