What will the budget mean to you?
Written on the 24 May 2017 by ArrowThis year's Budget aims to ease cost of living pressures while ensuring the nation lives within its means. While aiming for 'fairness, security and opportunity', the budget offers a welcome emphasis on affordability and infrastructure.
The National Disability Insurance Scheme will be fully funded beyond 2019. Medicine prices will fall (partly thanks to generic brands being used wherever possible), with additional drugs also added to the PBS.The cost of visiting a GP will fall as a freeze on Medicare rebates for bulk-billing doctors is lifted. Bulk billing incentives for diagnostic imaging and pathology services will also be reintroduced. The catch is that the Medicare levy is being bumped up from 2 to 2.5 per cent from 2019. This is especially painful for high-income earners looking forward to the end of the deficit levy they've been paying for three years.
The government is ploughing an extra $18.6 billion into schools over the next decade. In most cases, this will reduce the need for private schools to raise fees and public schools to demand greater 'voluntary' contributions. Nevertheless, a small proportion of private schools will have their funding cut under the Gonski needs-based-funding formula the Government has now embraced.The price of university degrees will increase 7.5 percent between 2018 and 2021. As of July 2018, graduates will need to start paying back their HELP loan at the lower threshold of $42,000. This will impact the after-tax incomes of university graduates but not for at least a year.
A range of initiatives is being offered to address the issue of housing affordability. Those saving for a home deposit can salary sacrifice up to $15,000 per year and $30,000 in total into their super. They will enjoy all the tax benefits of super (such as a 15 per cent tax rate) while still being able to withdraw the money when they find their dream home. Older Australians over 65 and wanting to downsize, will be able to make a non-concessional (after tax) contribution of up to $300,000 into their super after selling the family home.While the Government has made good on its promise to maintain negative gearing, property investors have little to cheer about. They'll no longer be able to claim a tax deduction on the costs involved in travelling to inspect their properties. There will also be a tightening of depreciation deductions. Deductions for plant and equipment for example, a washing machine will only be allowed for the investor who purchased them. (Previously, subsequent owners of an investment property could also make deductions on these items).
Initiatives to limit foreign investment, will presumably ease demand and impact capital growth and rental yields. These include a 50 per cent cap on foreign ownership in new developments, as well plans to unlock surplus Commonwealth land. As a sweetener for those investing in affordable housing there will be a CGT discount of 60 rather than 50 per cent.
Seniors and small business
Small businesses with a turnover up to $10 million will be able to immediately write off expenditure of up to $20,000 on business equipment for another year.
There will be 92,300 pensioners delighted to learn they'll be getting back the concession card they lost when the asset test came into effect earlier this year.If you are finding that the financial pain is outweighing the gain in this budget, keep in mind Australia has long outperformed most equivalent first-world economies, pointing to what the Treasurer described as "better days ahead".
If you'd like more information on how the measures contained in the Budget will affect you, please give us a call.