Last night the Federal Government handed down its 2017 Budget. The winners are first home savers, downsizers and small business – while taxpayers face an increase in the Medicare levy.
Some of the Key measures include:
Note: The Budget announcements are still only proposals at this stage and may or may not be made law
Please find below a summary of the key changes:
Date of effect: 1 July 2018
Individuals aged 65 or older will be able to make non-concessional (after tax) super contributions of up to $300,000, using proceeds from the sale of the family home. This limit will:
Unlike other non-concessional contributions, it will not be necessary to meet a work test or have a ‘total super balance’ under $1.6 million. The amount contributed will not be exempt from the assets test used to assess eligibility for the Age Pension.
Date of effect: From 1 July 2017
First home buyers will be able to save for a deposit by making voluntary concessional and non-concessional super contributions. Contributions will be limited to $15,000 per year (up to a total of $30,000) and will count towards the relevant contribution cap.
Withdrawals can be made from 1 July 2018. Concessional contributions plus assumed earnings withdrawn will be taxed at the person’s marginal tax rate, less a 30% tax offset.
The Government has provided an online estimator to help individuals calculate the potential benefit of the scheme.
Date of effect: When law is passed
Broadly, when new limited recourse borrowing arrangements are established, the loan balance will be included in an individual’s ‘total super balance’. The total super balance is used to determine a person’s ability to:
Also, repayments made from the SMSFs accumulation balance will count towards the member’s transfer balance cap, if the borrowing supports a pension account. The transfer balance cap limits the total lifetime transfers a person can make to retirement phase pensions.
Taxation
Date of effect: 1 July 2019
The Medicare levy will increase from 2% to 2.5% pa to fully fund the National Disability Insurance Scheme. This increase will flow to a range of other taxes such as Fringe Benefits Tax.
Date of effect: 1 July 2017
The ability for small businesses with an annual turnover of $10 million or less to claim an immediate deduction for eligible assets costing less than $20,000 each will be extended for 12 months.
Date of effect: 1 July 2018
The annual income threshold at which Higher Education Loan Program (HELP) repayments commence will be reduced to $42,000 (currently $54,869). Also, the repayment rate will start at 1% and increase progressively to 10%.
Date of effect: From 1 July 2017
Individuals who lost entitlement to the Pensioner Concession Card as a result of the 1 January 2017 assets test changes will be reissued with the card.
Date of effect: 20 June 2017
Eligible pensioners will be entitled to a one-off Energy Assistance Payment of $75 for singles and $125 per couple. Eligible recipients include Australian residents who qualify for the Age Pension, Disability Support Pension and Service Pension.
Date of effect: 1 July 2018
To be eligible for the Age Pension and Disability Support Pension (DSP), claimants will need to have 15 years of continuous Australian residence unless they have either:
Existing exemptions will continue to apply for DSP applicants who acquire their disability in Australia.
Date of effect: 1 July 2018
A single taper rate of 30 cents in the dollar will apply to income that exceeds the Higher Income Free Area ($94,316 in 2016/17). Currently, two tests are applied and the higher payment determines the entitlement.
Date of effect: 1 July 2017
The payment rates will not be indexed for two years. Indexation will resume on 1 July 2019.
Date of effect: 20 September 2018
The maximum Liquid Assets Waiting Period (LAWP) will increase from 13 to 26 weeks. The LAWP is a period an individual will be ineligible to receive Government income support. The new maximum period will apply to:
Liquid assets are readily available assets such as bank accounts, terms deposits, shares and managed funds.
Conclusion
If legislated, these significant changes may impact your financial strategy and therefore could warrant further discussion with your financial adviser. As a valued client of Calibre Private Wealth Advisers we look forward to discussing with you the impacts, opportunities and action which may be required in your individual circumstances to maximise the probability of achieving what is most important to you.
The information contained in this Federal Budget Analysis is current as at 9 May 2017 and is prepared by MLC Technical, part of GWM Adviser Services Limited ABN 96 002 071749, registered office 150-153 Miller Street North Sydney NSW 2060, a member of the National Australia Bank Group of Companies.
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