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What does the 2017 Federal Budget mean for you and your business?

It’s only been one week since the Treasurer announced the latest Federal Budget, bringing with it much speculation on its effect on our economy and our back pockets. According to the government, this budget is the answer to getting Australia back to surplus by 2020-2021. Here, we give you a run down on what it will mean for you and your business if these changes are passed by the Senate (which we think is likely).

Small Business

  • The Small Business Entity (SBE) instant write-off concession on assets valued up to $20,000 will be extended by one year to 30th June 2018.

Businesses with a turnover of less than $10million per annum will be able to take advantage of this extended deadline in order to buy equipment and machinery for business expansion and growth. From 1st July 2018, the immediately deductible amount will be reduced back down to $1,000, so small businesses on the cusp of expansion will be watching closely for the Senate’s vote on this item. If this is rejected by the Senate, the $20,000 threshold will reduce to $1,000 on 1st July this year, so keep an eye out.

Borrowing Money

  • Australia’s biggest five banks will be charged a new levy of 0.06 per cent on client deposits, beginning 1st July 2017.

The anticipated revenue of $6.2 billion should assist the budget returning to surplus, however, there are concerns that banks will offset this new tax burden with higher interest rates being passed onto borrowers.

In reply to speculation that this will place the burden on families, (rather than the biggest and most profitable banks in Australia), the Government said that the ACCC would undertake a residential mortgage pricing inquiry and force the banks to justify any changes they make from that time. It remains to be seen just how successful this will be in preventing banks from passing on the additional costs to families and business

Personal Tax

There is a range of potential changes that will impact individuals come tax time, namely:

  • From 1 July 2019, the Medicare levy will go from 2% to 2.5% for all taxpayers. This is anticipated to raise $3.55 billion in 2019-2020 to assist with funding the National Disability Insurance Scheme (NDIS).

 

  • Those with investment properties will no longer be able to claim travel expenses incurred from visiting their property to carry out maintenance or inspections. This is in response to those trying to claim expenses for a junket to Queensland to visit their rental unit on the way to a Gold Coast holiday!

 

  • Quantity Surveyors’ (QS) reports for tax purposes on existing properties will be limited to capital works only. This means you will no longer be able to claim depreciation for items you acquire as part of property purchases. It will be limited only to costs incurred after the purchase.

 

  • The Higher Education Loans Program (HELP) threshold will be reduced from 1st July 2018, with loan recipients earning $42,000 per annum or above required to begin repayments (as opposed to the current income limit of $55,874).

Housing

  • To encourage more downsizing, those aged 65 and over will be able to contribute $300,000 per person into superannuation from the sale of their home, tax-free (as long as they have lived in their home for at least 10 years). Unfortunately, no concession on stamp duty has been proposed and it’s unknown how this scheme will affect the Aged Pension Assets Test.

 

  • First home buyers will be able to salary-sacrifice up to $15,000 per year (to a total of $30,000) to assist with saving for a mortgage deposit. It is hoped that this measure will have more success than the ill-fated First Home Saver Accounts.

ATO Activity

  • The ATO will be provided an extra $32million to fund an additional year of targeted auditing. This will continue the inspections on those individuals and businesses who don’t comply with reporting deadlines, or are suspected of omitting income made via the cash economy.

 

  • Disappointingly, no changes will be made to simplify the Goods and Services Tax (GST). This is a missed opportunity to increase the GST and offset the increase with lower individual tax rates – something that we think is necessary as part of much needed broader tax reform in Australia.

Employers

  • Employers will have to pay between $1,200 to $1,800 annually for arranging temporary work visas, and a one-off fee of $3,000 or $5,000 for permanent skilled visas, for staff who are not residents of Australia. If passed, it is due to begin March 2018 and aims to encourage the employment of Australian residents, thereby improving the unemployment figures.

Overall, this budget has not caused a lot of significant changes, but it was good to see the SBE instant write-off being extended for a further 12 months and being made available to businesses with up to $10million turnover.

We wait with interest to see which of these proposals get passed through the Senate and the future impact on driving Australia towards a long-needed surplus.

If you’d like expert advice on how to prepare for upcoming tax time or proposed Federal Budget changes, call us on 8525 3500 to discuss your individual or business requirements.

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About the Author

I’m a Chartered Accountant with 13+ years experience working with business owners. I previously worked at PwC for 9 years providing advice to wealthy individuals and business owners. Which involved working through complex tax and business matters.