Last night was budget night which, amidst all of the excitement, has left many commentators a little confused about which party actually wrote the policies. Politicking aside, we’ve put together some of the key items that we felt would be of interest to our readers.
Medicare Levy increase
An increase in the Medicare Levy of 0.5% (effectively a tax increase to all but the lowest of income earners) will be brought into effect in two years time. The government wants this two year delay so they have time to explain how the increase in tax will be used to fund the NDIS.
Small business tax cut
This has been talked about a bit over the last year and seeks to extend the current 28.5% small business company tax rate all the way to 25% over a number of years. No breath-holding here folks as it’ll require crossbench support to get through which looks unlikely. Details:
- companies with a turnover of less than $10 million will pay the reduced rate of 27.5 per cent this financial year;
- in 2017-18, the new rate will apply to companies with up to a $25 million turnover;
- in 2018-19, the new rate will apply to companies with up to a $50 million turnover; and
- the tax rate will progressively reduce until 2026-27 to 25 per cent for companies with up to a $50 million turnover.
It’s worth noting here that a tax cut for small business companies is great from a cash-flow perspective – less tax to pay each year – but ultimately it only really benefits foreign owners given the way our franking credit system works. Food for thought.
Asset instant write-off
The $20,000 threshold for assets that can be immediately written off has been extended past the original deadline of 30 June 2017 out to 30 June 2018. Be nice to get this locked in permanently, but another year is certainly better than nothing.
Foreign worker levies
From March 2018 the government will be imposing levies on businesses that bring in foreign workers on temporary or permanent skilled visas. The levies are $1,200 for every year they employ a temporary visa worker and a one-off payment of $3,000 for each employee they sponsor for a permanent skilled visa. These levies are a bid to raise funds to pay for Australian traineeships and apprenticeships.
Having made it clear that the golden goose combo of negative gearing and the capital gains tax discount was off the table, the government have offered a range of policies to help with housing affordability. These measures include:
- first-home buyers will be able to salary-sacrifice (i.e. use pre-tax wages) into superannuation where it’ll be held and taxed at concessional rates until they are ready to buy. Looks like it’ll be capped at $15,000 per year and $30,000 in total
- retirees who sell the family home to downsize will be eligible for a one-off non-concessional contribution into super of $300,000
- annual taxes of up to $5,000 on foreign investors who leave their property empty rather than renting it out (this is surprisingly common)
- no more travel deductions for those holding investment properties and limits to be introduced on depreciation claims
There was also talk of more land releases south of Sydney and the creation of investment deals to encourage development of affordable housing in metro areas. Whether any of the above places downward pressure on house prices seems doubtful, but time will tell.
Other matters that may be of interest …
- HECS debt threshold will be lowered to $42,000 meaning repayments start sooner
- repeal of the 75% reach and cross-media ownership laws which could see a big shake-up in who runs our media here in Australia – Facebook TV anyone?
- university fees to increase by 7.5%
- additional $2.2bn for schools under a Gonski-style system
- Family Tax Benefit A payments reduced by $28 a fortnight if children aren’t fully immunised (vax-tax?)
- extra reach for the “Google tax” to stop multi-nationals having profits taxed offshore instead of Australia
- extra taxes on the big banks to bring them in line with comparable economies worldwide
- second Sydney airport at Badgery’s Creek receives $5.3bn in funding
- increase in hospital funding along with price cuts for medication available via the PBS
As measures are actually locked into law we’ll be sure to let you know via our regular Better Business monthly newsletter.
To finish on a lighter note PWC chief economist Jeremy Thorpe was quoted as saying “This is the Star Wars: Rogue One budget – the government has the plans but it hasn’t yet tackled the debt star.”
If you’ve got issues in your business you don’t seem to be able to get on top of, why not get in touch? Not only do we provide a full suite of bookkeeping and tax services here at Generate, but we’re also able to help with business coaching, strategy workshops, business plans and much more. You name the problem and I’m sure we can help.