What the 2017 Federal Budget means for you
Written and accurate as at: May 10, 2017 Current Stats & Facts
From a pure financial planning and wealth perspective, the positive news from this year’s Budget is that the changes are minimal. This is a very welcome outcome given the significant changes, particularly to superannuation, that were announced in last year’s Budget which are still largely due to come into effect from 1 July 2017.
Most of the changes announced were focused on addressing housing affordability, and there were some low on impacts for superannuation. Whilst the changes may be regarded as minimal only, it’s still important to understand what changes have been proposed, and more specifically, how these changes may impact you. We say “may impact you” as these proposals are just announcements at this stage and the final form of the announcements may differ when they ultimately become law. Also, everyone’s circumstances are different and the following summary should not be read as being
specific to your personal circumstances.
Measures to address housing supply and affordability
The Government has proposed a number of measures to encourage Australians to invest more into affordable housing, and has done this through increasing the level of capital gains tax relief that may be available upon the eventual sale of a qualifying residential investment properties. At the same time, they are proposing to tighten the rules for when foreign investors can purchase residential property in Australia and removed some associated tax concessions.
Two significant announcements in this area also have an impact in relation to superannuation savings.
First, the Government is launching a new First Home Super Saver Scheme from 1 July 2017, allowing first home buyers to use their superannuation fund as a method to save towards and then fund a deposit towards the purchase of their first home. There are rules around how much can be contributed and how much can be accessed, but the tax concessional nature of super can prove a boost to these savings.
Second, from 1 July 2018, individuals aged 65 and over can contribute up to $300,000 from the sale of their principal residence (if owned for at least 10 years) to super without the need to satisfy any contribution criteria. This could provide some individuals with a
unique opportunity to provide a final boost to their retirement savings plans.
Changes to social security rules
Over a period of time, the Government proposes to rationalise the number of payments that currently exist and streamline eligibility criteria. Perhaps of more immediate concern is the proposed introduction of a “demerit point system” for individuals who don’t
undertake appropriate job seeking activities which can result in a reduction or suspension of their income support payments.
As a result of changes to the Age Pension means test from 1 January 2017, some individuals ceased to qualify for the Age Pension and, as a result, lost access to the Pensioner Concession Card.
The Government will reinstate these Concession Cards for these affected individuals. And finally, a one-off energy assistance payment of $75 for single recipients and $125 per couple will be made to those eligible for qualifying payments on 20 June 2017 and who are Australian residents.
Taxation changes
As expected, there were no changes announced to the personal marginal tax rates for thresholds. However, the current temporary budget repair levy payable by high income earners will cease on 30 June 2017. As part of its commitment to the future of Medicare and
the National Disability Insurance Scheme, there will be an increase of 0.5% to the Medicare levy from 1 July 2019, raising it to a new level of 2.5% of taxable income from that date. Small business owners also gained an extension of 12 months to existing concessions allowing assets purchased for up to $20,000 to be immediately written off for tax purposes. These concessions will now apply
for assets purchased up to 30 June 2018.
Superannuation
Outside of the two significant changes relating to housing affordability, the superannuation system emerged largely unaffected from this year’s Federal Budget. Whilst there were some integrity measures announced and extension of some existing concessions, this reprieve for the superannuation system is welcomed given the majority of changes announced to super in the 2016 Federal Budget will take effect from 1 July 2017.
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This information has been prepared and issued by BT Financial Group which is the wealth management arm of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714 (Westpac), and is current as at 10 May 2017. BT Financial Group includes Magnitude Group Pty Ltd ABN 54 086 266 202 AFSL 221557, Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687, BT Funds Management Limited ABN 63 002 916 458 AFSL233724, BT Portfolio Services Limited ABN 73 095 055 208 AFSL 233715 and Asgard Capital Management Limited ABN 92 009 279 592 AFSL 240695.Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. Any case studies and examples used in this publication are purely for illustration only. The tax position described in this Federal Budget update 2017 is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change or further refinement.