2017 Federal Budget
Scott Morrison’s second Budget is less dramatic than his first. The winners this year are first homesavers, older downsizers, pensioners who previously lost their concession cards and small business.The main losers are taxpayers, who face an increase in the Medicare levy and those with HELP balances. At this point, none of the changes have been passed into law so the final version may be different to those announced. The following is a summary of the main points.
Contributions from downsizing the home 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:
* apply on a per person basis;
* be in addition to the ordinary non-concessional contribution cap; and
* be available where the home has been owned for at least 10 years.
The very good news is that it will not be necessary to meet a work test or have a superannuation balance under $1.6 million to qualify to make the contribution. This is also the first time there is an opportunity for people over the age of 75 to contribute to superannuation. Those receiving the Age Pension should be aware that the amount contributed to superannuation will not be exempt from the Centrelink assets test in the same way that their family home is.
First Home Super Saver Scheme 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, which is $25,000 in 2017/18. Withdrawals can be made from 1 July 2018. Concessional contributions plus assumed earningswithdrawn will be taxed at the person’s marginal tax rate, less a 30% tax offset. Different from the previous version of a first home savers scheme, a separate superannuation account will not be necessary. The Government has provided an online estimator to help individuals calculate the potential benefit of the scheme.
SMSF borrowings Date of effect: When law is passed
Repayments made to a SMSFs loan under a limited recourse borrowing arrangement (LRBA) will count towards the SMSF members’ 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. Also, when new LRBAs 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 eligibility for:
* making non-concessional contributions
* a Government co-contribution or a spouse contribution tax offset,
* and making catch-up concessional contributions above the annual caps from 1 July 2018, where certain conditions are met.
Medicare levy increase 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. This measure will affect all taxpayers rather than just high income earners.
Small business accelerated depreciation 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.
HELP thresholds and rates 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%.
Pensioner Concession Card Date of effect: From 1 July 2017
People who lost entitlement to the Pensioner Concession Card as a result of the 1 January 2017 Centrelink assets test changes will have their cards reissued.
Energy Assistance Payment 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.
Residency requirements for pensioners Date of effect: 1 July 2018
To be eligible for the Age Pension and Disability Support Pension (DSP), claimants will need to have15 years of continuous Australian residence unless they have either: 10 years continuous Australian residence, with 5 years of this being during their working life, or 10 years continuous Australian residence, without having received an activity tested income support payment for a cumulative period of 5 years. Existing exemptions will continue to apply for DSP applicants who acquire their disability in Australia.
Family Tax Benefit – Part A 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.
Family Tax Benefit – Part A and B Date of effect: 1 July 2017
The payment rates will not be indexed for two years. Indexation will resume on 1 July 2019.
Liquid Assets Waiting Period 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: singles without dependents with liquid assets of more than $18,000, or couples, or singles with dependents, with liquid assets of more than $36,000. Liquid assets are readily available assets such as bank accounts, terms deposits, shares and managed funds.
If you have any questions about how you may be affected by the 2017 Federal Budget, please call Greg on 0484 693 875 or email Greg.Meyers@integralwealth.com.au.
In preparing this 2017 Federal Budget Summary, Integral Wealth Solutions have not taken into account any particular persons’ objectives, financial situation or needs. You should, before acting on this information, consider the appropriateness of this information having regard to your personal objectives, financial situation or needs. We recommend you obtain financial advice specific to your situation before making any financial decision.
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