Last night, Federal Treasurer Scott Morrison handed down his second Federal Budget.
Here’s a roundup of some of the key proposals put forward, and a look at how they might affect your financial goals — whether you’re starting out in your working life, building a career and family, or enjoying the fruits of your labour in retirement.
Remember, at this stage these are just proposals and not yet law. As such, they could change as legislation passes through parliament.
First Home Super Saver Scheme
To help first home buyers save a deposit more quickly, it is proposed that from 1 July 2017 they will be able to make voluntary contributions of up to $15,000 per year to their super, to a lifetime total of $30,000, to save a deposit for their first home.
For example, these contributions could be made by salary sacrificing from pre-tax pay or by making non-concessional (after-tax) contributions.
Withdrawals of the contributed amounts, along with associated investment earnings, will be allowed from 1 July 2018. After-tax contributions won’t be subject to tax when withdrawn, while concessional (before-tax) contributions will be taxed at your marginal tax rate, less a 30% tax offset.
The scheme will be administered by the Australian Taxation Office.
Foreign property ownership
The government is proposing an annual charge on foreign property owners who own properties remaining vacant or unavailable for rent for at least six months of the year. This annual charge will be equivalent to the foreign investment application fee.
There are also plans to restrict foreign ownership of new residential developments to 50%, with the aim of increasing stock in new housing developments available for Australians.
Boosting your super when downsizing
Currently, people aged between 65 and 75 who want to make voluntary super contributions must satisfy a work test, and people over 75 are generally unable to contribute to their super.
The government has proposed that from 1 July 2018, people aged 65 and over will be able to make an after-tax contribution to their super of up to $300,000 from the sale of their family home.
Both members of a couple will be able to take advantage of this proposal, meaning $600,000 per couple can be contributed to super.
These contributions are in addition to any other concessional (before-tax) or non-concessional (after-tax) contributions you’re eligible to make.
To qualify, the property sold needs to have been your main place of residence for at least 10 years, but there are no restrictions imposed in relation to work status or your super balance.
Increasing the Medicare levy
The Medicare levy, which is based on your taxable income, is proposed to increase from 2% to 2.5% from 1 July 2019. The increase will be used to fund the National Disability Insurance Scheme (NDIS).
The government is proposing that from 1 July 2017 travel expenses incurred in inspecting, maintaining or collecting rent on residential investment properties will no longer be tax deductible. Residential property investors will continue to be able to deduct fees paid to real estate agents or other property managers for these services.
It is proposed that depreciation deductions for plant and equipment, which include things like dishwashers and ceiling fans, in residential investment property will also be limited to the actual expenditure incurred by the investor. This is to ensure successive purchasers of a property cannot depreciate assets beyond their actual cost.
The government has announced plans to allocate more funding per student to most schools, which will amount to an extra $18.6 billion over 10 years. As part of the plan, some schools may lose Commonwealth funding and others may not receive as much.
The government has proposed a phased increase to uni fees, with the cost of a four-year course set to increase by between $2,000-$3,600. By 2022, students will be paying 7.5% more for a university degree.
If you’ve deferred the payment of your fees by using the government’s Higher Education Loan Program (HELP), the income level at which you’ll have to start repaying the debt is proposed to change. Currently, HELP debts become repayable once you are earning $55,874, but the government is proposing to reduce this amount to $42,000 from 1 July 2018.
Pensioner Concession Card
If you lost your Pensioner Concession Card due to the assets test changes that came in on 1 January 2017, it is proposed that this benefit will be reinstated.
Pensioner residency requirement changes
Currently, to be eligible for the Age Pension or Disability Support Pension applicants must have 10 years of total Australian qualifying residency, which must include at least one period of a minimum of five years of continuous residency.
It is proposed that from 1 July 2018 applicants will need to have:
- 15 years of continuous Australian residency
- 10 years of continuous Australian residency, with five of those years between the ages of 16-65, or
- 10 years of continuous Australian residency without having received an activity-tested income support payment (eg Newstart) for a cumulative period of five years.
Energy assistance payment
It is also proposed people receiving a qualifying income support payment will receive a one-off payment of $75 for singles and $125 for couples to assist with energy bills.
The government has announced a proposed extension to 30 June 2018 of the accelerated depreciation rules for small businesses. This will allow businesses with annual aggregated turnover of less than $10 million to immediately deduct purchases of eligible assets costing less than $20,000 where first used, or installed ready for use, by 30 June 2018.
Want to know more?
View a brief video below from AMP's cheif economist Shane Oliver or visit AMP Capital's Federal Budget page for more detailed analysis of key Budget measures, or visit the government’s Federal Budget website. And remember, the proposals may change as they pass through Parliament.
Your financial adviser can help explain how the Budget proposals might affect you. If you don’t have an adviser, we can help you find one here, or you can call us on 131 267 from 8.30am to 7pm (AEST) Monday to Friday.
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