Welcome to the 2017-18 Budget edition of the Spry Roughley Report.
Fairness, Security and Opportunity
In a very wide ranging budget, the Treasurer has played winners and losers with increased spending and increased taxation.
What is really interesting are the economic assumptions underlying the policy measures with GDP rising to 3% by 2018/19 and wages growth to 2.5%. Clearly the Government is upbeat about the economic forecasts but the assumptions seem to be in the mid-range and conservative.
The headline issues are:
- National infrastructure spending of $75B over 10 years including the Western Sydney Airport Corporation;
- More money for schools under the Gonski model, less money for universities and higher course costs for students and earlier repayment of HELP;
- First home owners can salary sacrifice up to $30,000 per person (capped at $15,000 per year) via their superannuation fund;
- Guaranteed funding for Medicare and the NDIS through increased Medicare Levy.
Big Banks (ANZ, CBA, Macquarie, NAB & Westpac) will have a 0.06% levy on liabilities; and
- There will be a levy on businesses employing foreign workers with a one-off payment of $3,000 or $5,000 and annual payments of $1,200 or $1800 per worker. This money is to go to training Australian workers.
For clients, the significant issues to watch out for include:
- Medicare levy to increase to 2.5% from 1 July 2019
- For small business (up to $10M turnover) the $20,000 instant asset write-off will be extended to 30 June 2018. Other small business concessions apply and remember, the company tax rate has been cut to 27.5%.
- There are some increased integrity measures around negative gearing of residential real estate properties targeting:
- the denial of travel expenses relating to inspecting, maintaining or collecting rent for a residential property from 1 July 2017, and
- more importantly the removal of depreciation deductions for Plant & Equipment unless the cost is actually incurred by the purchaser.
- Division7A rules will be amended from 1 July 2018 to provide clearer rules for taxpayers. Details are yet to be released.
- More taxation on foreign residents property investors through increased capital gains tax (CGT) withholding of 12.5% on properties over $750,000. The CGT main residence exemption will be removed from 9 May 2017, although existing properties are grandfathered until 30 June 2019. This may provide an opportunity to sell those properties tax free in the next 2 years. A new annual charge on underutilised residential property will also apply.
After recent major announcements, superannuation has been left alone (apart from one change – see below) and there were no significant changes to capitals gains tax discounts or other tax reform.
There was one superannuation change which is to allow a person aged 65 or over to make a non-concessional contribution of up to $300,000 from the proceeds of selling their home from 1 July 2018. These contributions will be in addition to the existing caps (including the $1.6M balance) and various tests. A couple can take advantage of this, meaning an extra $600,000 could be contributed to superannuation from downsizing the family home.
The ATO will have more funding to target fraud and organised crime, as well as continuing the focus on multinational tax avoidance and transfer pricing.
ASIC will be funded through an industry funding model, meaning that companies will pay a higher levy than the annual filing fee. The levy will commence from the 2018/19 year and the amount has not yet been determined.
We have provided indepth analysis' for further explanation: Tax & Accounting Overview and Political & Economic Overview.
As always, time will tell but there are some good news items and a number of planning opportunities for our clients.
As usual, please do not hesitate to call us on (02) 9891 6100 should you wish to discuss how any of the points raised in the report specifically affect you, or click here to send us an email.
Shaun Madders, Director
Spry Roughley Services Pty Limited
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