In his final Budget before the federal election next year, Treasurer Scott Morrison said the Budget is focused on further strengthening the economy to “guarantee the essentials Australians rely on” and “responsibly repair the Budget” to return the balance sheet to surplus in 2019-20, a year earlier than forecast.
On the housing front, cooling property prices allowed the Government to leave the issue of affordability firmly off the agenda. Further, the Government’s new plan to allow older Australians to stay in their homes for longer, as part of the “More Choice Longer Life Plan” is likely to hinder the supply of available properties to prospective first home buyers. But was it the right move?
We have put together some of the highlights to help you understand what the proposed Budget might mean for you and your family.
The cooling property market may be the reason that property investors managed to get off scott-free in this year’s Budget. Many will be breathing a sigh of relief that negative gearing has been kept off the agenda.
Last year, the 2017–18 Budget removed tax depreciation on established properties as well as travel deductions and introduced measures to combat housing affordability. With these sweeping changes in the bag, the Treasurer merely referenced planned deductions for expenses associated with holding vacant land that is not genuinely used to earn assessable income will be denied.
First Home Buyers
Nothing new for first home buyers in this year’s Federal Budget however last year’s introduction of the First Home Super Saver Scheme, which allows first home buyers to accelerate savings via salary sacrifice to fund a new home purchase, comes into effect from 1 July 2018.
First home buyers will be able to withdraw the cash they have saved as well as any earnings on that money. All withdrawals will be taxed at 30% below the marginal tax rate.
The Government’s new plan to allow older Australians to stay in their homes for longer, as part of the “More Choice Longer Life Plan” is likely to hinder the supply of available properties to those looking to buy their first home.
The biggest news out of the Budget for working families is the Treasurer’s plan to put more money in the pockets of over 10 million Australians who are struggling with stagnant wages and the high cost of living where individuals will receive tax cuts of up to $530 a year ($10 a week).
The Treasurer promised to protect incomes earned by Australians from ‘bracket creep’ and announced the top threshold of the 32.5% tax bracket will increase from $87,000 to $90,000 from 1 July, 2018.
From 2022-23 the top threshold of the 19% tax bracket will be increased from $37,000 to $41,000 and the top threshold of the 32.5% bracket from $90,000 to $120,000.
In what was touted as a fairer and simpler tax approach, the Treasurer said by 2024-25, the 37% tax bracket will be abolished.
The Federal Government announced stringent measures to tackle the black economy by making it difficult for individuals and companies to avoid paying tax. The Treasurer also put multinational organisations on notice about tax avoidance and the need to pay their fair share of tax.
A multi-agency Black Economy Standing Taskforce will be set up to detect sectors that are rorting the system and seek prosecutions, while compliance and audit programs by the Australian Tax Office will be extended.
Cash payments above $10,000 will be illegal from 1 July 2019 and instead, transactions will have to be made electronically or by cheque, so that they can be tracked. Transactions with financial institutions or between individuals won’t be affected.
In a move to help working Australians, the government looks to return an estimated $6 billion worth of lost super to three million super fund members by 2020.
The Treasurer announced Australians under 25 will no longer be forced to take up life insurance cover within their super.
Exit fees are also to be banned, in a move to help Australians consolidate their superannuation accounts or switch to a better one.
From 1 July 2019, the work test applying to those aged 65-74 wishing to contribute to superannuation will be removed in the first financial year that they do not meet this test, provided their superannuation balance is under $300,000.
Superannuation accounts which haven’t been active for at least 13 months will see balances below $6,000 transferred to the ATO, which will use data-matching to find the member’s active account. This program will commence 1 July 2019.
An annual cap of 3% of the balance will also be introduced on passive fees charged by superannuation funds on accounts with balances less than $6,000. This will help job-changers with multiple ‘lost super’ accounts to stop paying fees and insurance premiums that eat away at the balance on each account.
Self-Managed Super Fund
More flexibility has been introduced to the management of SMSFs. The maximum number of members allowed in SMSFs and small APRA funds will be increased from four to six from 1 July 2019. This will appease SMSF who wish to increase the total number of funds available for investment.
In a small reduction to the compliance burden of SMSFs, those with a history of good record keeping and compliance will only have to be audited once every three years rather than annually. This may save eligible SMSFs around $1,000 over a three year period.
Continuing the Government’s $75 billion investment in transport infrastructure, the Budget includes $24.5 billion for new nationally significant transport projects that aims to benefit people and businesses in every state and territory.
The Government will direct $3.5 billion towards roads of strategic importance within the Northern Australia Package, Tasmanian Roads Package, the Barton Highway Corridor Package for NSW and ACT. As part of this, $1.5 billion will be spent on future national priorities, such as the Melbourne to Brisbane Inland Rail project, and the Western Sydney Airport announced in last year’s Budget.
There will also be a $1 billion Urban Congestion Fund, which aims to encourage investment in new projects to help commuters.
Parents struggling with the ongoing cost of childcare will benefit from a new childcare package that comes into effect on 2 July 2018. Previously, the childcare rebate was capped at $7500 per annum this has increased to $10,190 per year per child.
Under the Child Care Subsidy, the amount of cash a family is entitled to be based on the family’s combined annual income. Those earning less will benefit from more financial support.
Families earning $186,958 or less per year won’t be capped on the amount of Child Care Subsidy they can access.
Families earning over $186,958 and under $351,248 will still have an annual cap, which will increase to $10,190 per year per child.
Retirees wanting to boost their income in the ‘gig economy’ will be able to earn an extra $50 per fortnight (or a maximum of $300 per fortnight) without it affecting their pension. The move is motivated by the fact that people are living longer and want to maintain their lifestyle into old age.
The Government’s goal to allow older Australians to remain in their homes instead of moving into aged care facilities was given a boost via the “More Choice Longer Life Plan” where an additional 14,000 high-level home care packages will be provided.
Small business owners were afforded some additional incentives. In last year’s Budget, the Government announced that small businesses with a turnover of anywhere up to $10 million will pay a reduced company tax rate of 27.5%. This corporate tax rate was extended to companies with annual turnover less than $25 million in 2017‒18 and will extend to companies with annual turnover less than $50 million from 1 July 2018.
In addition, the Federal Government announced that the $20,000 instant asset tax write-off introduced in the 2016 Budget, would be extended for another year and opened to businesses with an annual turnover of up to $10 million.