by Debbie Reed, Director
I would like to draw your attention to four proposals in the 2017 Budget which may affect your overall financial strategy. This article highlights a number of groups particularly impacted by Budget announcements including:
- Taxpayers earning more than $21,335;
- Retirees who are home owners;
- Investment property owners;
- Small business owners.
In this article I outline some of the key changes proposed in the 2017 Budget relating to the Medicare levy; superannuation incentives for retirees; deductibility for property investors; and CGT concessions for small businesses.
- Increase to Medicare levy from 2% to 2.5% – from 1 July 2019
The change to the Medicare levy will impact all taxpayers with income over a certain level (currently $21,335 for an individual for the 2015/16 year). This proposal, identified to fund the National Disability Insurance Scheme, may increase your overall tax liability. If legislated, it will apply from 1 July 2019. Other tax rates that are linked to the top personal tax rate, such at the FBT rate, will also be increased.
- Superannuation incentives for retirees – from 1 July 2018
In the Budget announcement, retirees aged 65 or over, are incentivised to contribute more funds into the concessionally taxed superannuation environment. The incentive encourages retirees to downsize and contribute non-concessional contributions of up to $300,000 (or $600,000 per couple) from the proceeds of selling their principal residence (owned for at least 10 years). This measure will also enable retirees to exceed the $1.6m total superannuation balance test. If legislated, this proposal will apply from 1 July 2018.
- Deductions for residential rental properties limited – from 1 July 2017
Depreciation deductions for rental property owners will be limited to investors who incurred the expenses, not subsequent owners. As a consequence of this proposal, you may incur costs for which a tax deduction is not available until an asset is sold.Travel costs relating to the investment property will also no longer be considered deductible expenses unless an agent undertakes the travel. If legislated, these changes will apply from 1 July 2017.
- Small business CGT concessions on sale of businesses to be tightened – from 1 July 2017
Small businesses will face stricter rules for accessing CGT concessions, specifically, concessions will only be available for assets directly associated with business operations. This affects businesses with a turnover of less than $2m or net business assets of less than $6m. If this proposal is legislated, fewer assets are likely to be eligible to access small business CGT concessions which may affect your tax liabilities. It will be important to seek advice to structure assets to make the most of small business CGT concessions.
A number of other Budget announcements may impact your personal situation, however on the whole we expect the Budget to have minor impacts for our clients. It’s important to note that the Budget announcements will also need to be passed through Parliament before becoming law.
If you have any questions about how the Budget announcements may affect your personal situation, please contact your DLA manager or director on (07) 3863 9444.