After the usual cycle of rumour, media leaks and political to-and-fro the coalition government officially handed down the Federal Budget for 2017-18 on the evening of 9 May.
This year’s budget contained promises regarding investment in infrastructure, guarantees of the future of services such as Medicare, school funding and more – all while aiming for an end to budget deficits by 2021. Whilst the government has steered clear of any significant structural reforms to tax and superannuation this year, there have still been some changes proposed to help pay for these promises.
As much of the media coverage surrounding the budget announcement tends to focus on the big headline items such as the proposed new levy on the major banks, I thought it would be useful to present a distilled summary of the main proposed tax and super changes that are likely to impact on SME’s, their owners and their families.
Tax – Individuals
- Increase in the Medicare Levy from 2.0% to 2.5% of taxable income from 1 July 2019
- New thresholds and rates for repayment of HELP debt to be introduced from 1 July 2018 (proposed lower minimum repayment income threshold of $42,000)
- Deductions for travel expenses relating to rental properties disallowed from 1 July 2017
- Plant and equipment depreciation (Div 40) deductions on rental property assets to be limited to outlays actually incurred by the investor from 1 July 2017 – meaning existing plant and equipment installed by a previous owner can no longer be depreciated by successive owners (grandfathered for assets forming part of a property as of 9 May 2017)
Tax – Business
- $20,000 instant asset write-off threshold for eligible small business entities to remain in place for a further 12 months until 30 June 2018
- Small Business CGT Concession rules to be amended to deny eligibility for assets which are unrelated to the small business from 1 July 2017
- Taxable Payments Reporting system (currently applying to the building and construction industry) to be extended to contractors in the courier and cleaning industries from 1 July 2018
- Limited Recourse Borrowing Arrangement liabilities to be included in a members total superannuation balance and transfer balance cap (currently $1.6M) from 1 July 2017
- Non-arms length income provisions to be amended to further limit opportunities for members to use related party transactions on non-commercial terms from 1 July 2018
- Persons aged 65 or over will be able to contribute up to $300,000 each from the proceeds of the sale of their main residence (where it was held for at least 10 years) as a non-concessional contribution into super from 1 July 2018 – not restricted by non-concessional contribution limit for those with member balances above $1.6M (though $1.6M pension balance transfer cap will still apply) or work test/age limits
- New scheme allowing individuals to contribute up to $15,000 p/a (up to a total of $30,000) in voluntary concessional contributions from 1 July 2017 which can later be withdrawn for a deposit for their first home
As always it will be interesting to understand the detail around how some of the proposals are to be practically implemented and administered – and to see which survive their journey through the houses of parliament to become law.
Unsure of what some of the announcements might mean to your personal circumstances? Get in touch with BLG Business Advisers today to discuss on (02) 4229 2211 or online.