The Federal Budget 2017

Business

$20,000 instant asset write-off extended 

The popular $20,000 instant write-off for assets purchased by businesses with an aggregated turnover of $10 million or less is extended until 30 June 2018, further improving cash flow. Be mindful that this depreciation only applies to some assets and that they will need to be installed and ready for use by 30 June 2018 to qualify.

Assets costing over $20,000 can be allocated to a pool and depreciated at a rate of 15% the first ear and over 30% for each year thereafter.

From 1 July 2018, the instant asset write-off will revert back to $1,000.

Contractors in the courier and cleaning industries

Following in the footsteps of the building industry some years ago, courier and cleaning businesses will be required to report annually on payments made to contractors. The Australian Tax Office (ATO) will expect lodgement of the contractor’s following information in August 2019:

  • ABN;
  • Name;
  • Address;
  • Gross amount paid for the financial year;
  • Total GST included in that amount.

Levy on foreign workers

Subsequent to the announcement of the replacement of 457 visas, the Treasurer announced the introduction of a new levy on businesses with foreign workers on certain skilled visas from March 2018. The revenue raised from this measure will support the training and development of Australian workers.

Businesses with an annual turnover of less than $10 million will be required to make an upfront payment of $1,200 per visa per year for each employee on a Temporary Skill Shortage visa and a one off payment of $3,000 for each employee being sponsored on a permanent Employer Nomination Scheme or permanent Regional Sponsored Migration Scheme visa ($1,800 and $5,000 respectively for business with a turnover of $10 million or more)

GST on residential properties and subdivisions

From 1 July 2018, to avoid failure to remit GST, property developers will no longer manage the GST on sales of newly constructed residential properties or new subdivisions. Instead, they will be required to remit the GST directly to the ATO as part of the settlement process.

Bank Levy 

Starting 1 July 2017, a new bank levy will be imposed on the major financial institutions and will be calculated quarterly as 0.06% of the banks licensed entity liabilities such as corporate bonds, commercial paper and certificates of deposits and Tier 2 capital instruments. To prevent the banks from funding the levy with an increase in the interest rates, the Australian Competition and Consumer Commission (ACCC) will undertake residential mortgage pricing until 30 June 2018.

Farming businesses 

The Farm Business Concessional Loans Scheme will be extended to assist farmers and their partners who have received their full entitlement for the Farm Household Allowance (FHA) and who do not receive any other form of Commonwealth income support.

Former FHA recipients will be eligible for loans of up to 50% of their current debt and to a maximum of $1 million for debt refinancing only. Loan applications will be accepted on the basis of all existing eligibility criteria with the exception of the requirement to be in a rain deficient area.

Superannuation

Incentive to downsize 

If you are aged 65 or more, have owned your principal residence for the last 10 years and would like to downsize, now is the time! Last night, the Treasurer announced that the government will allow a non-concessional contribution of us to $300,000 from the proceeds of the sale from 1 July 2018. This non-concessional contribution will be excluded from the existing age test, work test and the $1.6 million balance threshold (however not the $1.6 million transfer cap)

Further, for the properties under joint ownership “both members of a couple” can take advantage of the concession for the same home, therefore increasing it to $600,000 per couple.

First home owners and super contributions

From 1 July 2018, first home owner applicants will be able to withdraw specific voluntary contributions made into super from 1 July 2017. In essence, extra salary sacrificing (when allowed) could be used to save for a deposit.

Extension of tax relief for merger super 

This tax relief enables superannuation funds to transfer capital and revenue losses to a new merged fund and was due to lapse on 30 June 2017. it has been extended to 30 June 2020 and will continue to ensure that members’ balances are not reduced by tax during the merge.

Limited Recourse Borrowing Arrangements (LRBAs)

The measure introduced in this budget in relation to LRBAs aim at reinforcing those announced in last years budget. From 1 July 2017 a Self managed Superannuation Fund (SMSF) member with a balance of $1.1 million and an outstanding LRBA loan balance of $500,000 will have a total super balance of $1.6 million and therefore will not be able to make further non-concessional contributions.

Non-arm’s length arrangements 

From 1 July 2018, the non arm’s length income rule will be amended to prevent members using related party transactions on non-commercial terms to increase their superannuation savings by including expenses that would normally apply to commercial transactions.

Individuals/Families

Medicare levy and low-income threshold increased

From 1 July 2019, the Medicare levy will increase to 2.5% of taxable income, however low-income earners will continue to receive relief from this levy through low-income tax threshold for singles, families, seniors and pensioners which will also increase for the 2017 financial year as follows:

  • Singles – $21,655
  • Families – $36, 541 plus $3,356 for each dependent child or student
  • Single seniors and pensioners – $34,244
  • Family threshold for seniors and pensioners – $47,670 plus $3,356 for each dependent child or student

Family tax Benefits

The Family Tax Benefit will remain the same for the next 2 years and indexation will resume on 1 July 2019.

A consistent 30 cent on the dollar income test taper for Family Tax Benefit Part A families with a household income in excess of the Higher Income Free Area will apply from 1  July 2018.

Limitation of deductions for rental properties 

From 1 July 2017, deductions for travel expenses relating to inspecting, maintaining or collecting rent for a residential rental property will no longer be allowed as the Government feels it was “abused”.

Deductions for plant and equipment, such as dishwasher, carpet or ceiling fan, will also be limited due to concerns that these items were being depreciated by successive investors in excess of their value. A deduction on plant and equipment purchased after 9 May 2017 will still be claimable over the effective life of the asset, however subsequent owners of the property will not be able to claim that deduction.

Acquisitions of existing plant and equipment items will be reflected in the cost base for CGT purposes for the subsequent investors. Therefore the cost of these items will have some tax benefit when the property is ultimately disposed of.

Non-compliant jobseekers

A new demerit point system will be introduced to penalise deliberately non-compliant job seekers for each failure (without reasonable excuse). Individuals who accrue four demerit points in six months will enter a three-strike Intensive Compliance Phase and will face the following penalties:

  • Lose 50% of their fortnightly payment for their first strike;
  • Lose 100% of their fortnightly payment for their second strike;
  • Cancellation of their payment for four weeks for their third strike

Infrastructure projects

The Treasurer announced funding for major infrastructure projects on transport connections such as upgrades to the Bruce Highway in Southeast Queensland and other major roads throughout the state as well as upgrades to the railway system around the country.

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