1. Personal tax rates – no change: 2% Budget deficit levy to end on 30 June 2017
The 2017-18 Budget contained no changes to the personal income tax rates and thresholds. This means that the 2% budget deficit levy on incomes over $180,000 will not be extended beyond its initial 3 years. The levy will therefore cease at the end of the 2016-17 financial year.
2. Medicare levy to be increased to 2.5% from 1 July 2019
The Government will increase the Medicare levy to 2.5% from 1 July 2019 (up 0.5% from the current 2% Medicare levy).
3. Medicare levy low-income thresholds for 2016-17
For the 2016-17 income year, the Medicare levy low-income threshold for singles will be increased to $21,655 (up from $21,335 for 2015-16). For couples with no children, the family income threshold will be increased to $36,541 (up from $36,001 for 2015-16). The additional amount of threshold for each dependent child or student will be increased to $3,356 (up from $3,306).
4. Company tax rate: Gov’t re-commits to remainder of 10-year package to further reduce rate
The company tax rate changes, as amended by the Senate, are summarised in the following table. The changes have to be approved by the House of Reps.
|
Financial year |
Aggregated turnover less than |
Company tax rate |
|
2016-17 |
$10m |
27.5% |
|
2017-18 |
$25m |
27.5% |
|
2018-19 |
$50m |
27.5% |
|
2019-20 to 2023-24 |
$50m |
27.5% |
|
2024-25 |
$50m |
27% |
|
2025-26 |
$50m |
26% |
|
2026-27+ |
$50m |
25% |
In the 2016-17 financial year, the reduced corporate tax rate of 27.5% will apply for businesses with an aggregated turnover of less than $10m; $25m turnover in 2017-18; and $50m turnover from 2018-19. This effectively implements the first 3 years of the Government’s 10-year plan for company tax cut
5. Higher instant asset write-off threshold for SBEs extended
The Government will extend the current instant asset write-off ($20,000 threshold) for small business entities (SBEs) by 12 months to 30 June 2018.
Note that when the SBE changes in the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 receive assent, the aggregated turnover threshold for a SBE will increase to $10m (as from 2016-17).
6. Taxable payments reporting system extended to couriers and cleaners
The Government will extend the taxable payments reporting system (TPRS) to contractors in the courier and cleaning industries.
7. New residential premises: purchasers to pay GST
Purchasers of newly constructed residential properties (or new subdivisions) will be required to remit the GST directly to the Tax Office as part of settlement.
8. Restriction on depreciation deductions for property investors
From 1 July 2017, the Government will limit “plant and equipment” depreciation deductions to outlays actually incurred by investors in residential real estate properties.
The Budget Papers state that plant and equipment items are usually mechanical fixtures or those which can be “easily” removed from a property such as dishwashers and ceiling fans.
Investors who purchase plant and equipment for their residential investment property after 9 May 2017 will be able to claim a deduction over the effective life of the asset. However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property.
9. No deduction for residential rental property travel expenses
Travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed from 1 July 2017.
10. Increased CGT discount for investments in affordable housing
From 1 January 2018 the CGT discount for individuals will be increased from 50% to 60% for gains relating to investments in qualifying affordable housing.
To qualify for the higher discount, housing must be provided to low to moderate income tenants, with rent charged at a discount to the private rental market rate. Tenant eligibility will be based on household income thresholds and household composition.
The affordable housing must be managed through a registered community housing provider and the investment held for a minimum period of 3 years.
11. Super contributions of proceeds up to $300,000 from downsizing a home
The Government will allow a person aged 65 or over to make a non-concessional contribution of up to $300,000 from the proceeds of selling their home from 1 July 2018. These contributions will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6m total superannuation balance test for making non-concessional contributions (which applies from 1 July 2017).
The measure will apply to sales of a principal residence owned for the past 10 years or more. Both members of a couple will be able to take advantage of this measure for the same home. The measure seeks to reduce a barrier to downsizing for older people to enable more effective use of the housing stock by freeing up larger homes.
12. First home super saver scheme
The Government will encourage home ownership by allowing future voluntary contributions to superannuation made by first home buyers from 1 July 2017 to be withdrawn for a first home deposit, along with associated deemed earnings.
Concessional contributions and earnings that are withdrawn will be taxed at marginal rates less a 30% offset. Combined with the existing concessional tax treatment of contributions and earnings, this will provide an incentive that will enable first home buyers to build savings more quickly for a home deposit.
Under the measure up to $15,000 per year and $30,000 in total can be contributed, within existing caps. Contributions can be made from 1 July 2017. Withdrawals will be allowed from 1 July 2018 onwards. Both members of a couple can take advantage of this measure and combine savings for a single deposit to buy their first home together.