Federal Budget 2017

by

The Federal Government handed down the 2017 Budget on the 9th of May. While the focus last year was on changes to super, this year the Government focused on Housing, Education, and Infrastructure while also including some small surprises.


Housing

First Home Savers Scheme
From 1 July 2017, if you are saving for your first home you will be able to contribute up to an additional $15,000 per year into your super over and above your super guarantee contributions (the 9.5% your employer contributes). A total of $30,000 can be contributed with the funds being used to purchase your first home. Both members of a couple can utilise this benefit.
You won’t be able to withdraw the funds until after 1 July 2018 and it’s important to note that if you don’t purchase your first home, the funds will remain in super and you will not be able to access them until you reach age 65, or retire.
Over 65’s selling their home
From 1 July 2018, if you are aged over 65 and sell your home (not an investment property) you will be able to contribute up to $300,000 into super from the sale proceeds as an after tax contribution. You need to have owned your home for at least ten years to be able to take advantage of this measure. The amount contributed to super will count under the Age Pension assets test, and may impact the amount of Age Pension you receive. If you are a member of a couple, you can both contribute up to $300,000.
Other measures
From 1 July 2017, you will no longer be able to claim a tax deduction for the cost of travelling to inspect, maintain or collect rent for your investment property.
Also from 1 July 2017, you will only be able to claim depreciation on plant and equipment (such as dishwashers and ceiling fans) that you paid for as an investor, you will no longer be able to claim depreciation on assets purchased by a previous owner. This does not apply to depreciation on the actual building. The Government will unlock surplus Commonwealth land for housing and will include a 50% cap on foreign ownership in new developments. If you invest in affordable housing the capital gains tax discount will be increased to 60%, currently 50%.


Education

The Government is investing an extra $18.6 billion into schools over the next ten years. Most schools will receive more funding, whilst some wealthier schools will lose some of their funding. Early childhood education will receive an additional $428 million over two years.
The price of a university degree will increase by 7.5% between 2018 and 2021, and from 1 July 2018 graduates will need to start paying back their HELP loans when their income reaches $42,000.

 
Health

The cost of visiting a GP should decrease as a freeze on Medicare rebates for bulk billing is lifted. Bulk billing for pathology and diagnostic imaging will be reintroduced. Medicine prices should fall as doctors will be encouraged to prescribe generic brands where possible, and some new medicines will be added to the PBS.
The Medicare levy will be increased from 2% to 2.5% from 1 July 2019, to fund the National Disability Insurance Scheme (NDIS).


Infrastructure

The Government will fund $75 billion worth of infrastructure projects to create jobs and promote economic growth. This includes $5.3 billion to build a second airport at Badgerys Creek, $10 billion will go towards a National Rail program to fund urban and regional rail projects over the next years, and $8.4 billion will be spent on a Melbourne to Brisbane inland rail to allow freight to travel between the two cities in under 24 hours.
The Government will also fund State infrastructure projects such as $1 billion for regional rail upgrades in Victoria and $30 million for planning a rail link to Tullamarine Airport. $1.6 billion will go to Western Australia for road and rail projects and $844 million to Queensland for the Bruce Highway.


Other measures

  • 92,300 pensioners will be getting back the Pensioner Concession card they lost due to the asset test changes at the start of the year.
  • A major bank levy of 0.06% on the major banks, which the Government hopes will raise $6.2 billion over the next four years. It is likely the banks will pass this on to customers through higher fees, or lower interest rates on loans.
  • Small businesses with an annual turnover of up to $10 million will be able to continue to write off expenditure of up to $20,000 on business equipment for another year.
  • Job seekers and parents who receive income support will have increased activity test requirements from 20 September 2018.
  • A one-off Energy Assistance Payment of $75 for singles and $125 per couple will be paid to those eligible on 20 June 2017.
  • Families with an income above $350,000 per annum will not be eligible for a child care subsidy.

    It is important to remember that the Budget announcements are still only proposals at this stage and will need to pass through both Houses of Parliament before taking effect.



DISCLAIMER

Aon Hewitt Financial Advice Limited | ABN 13 091 225 642 AFSL No 239183
This information may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product. This document, including all tax and super calculations, has been prepared using legislation in place as at 1 December 2016.
© May 2017 Aon Hewitt Financial Advice Limited.