What is the Federal Budget?
Presented annually, on the second Tuesday of May, the Federal Budget explains to the Australian public how the government intends to manage the nation’s finances. It outlines how they plan to tax and spend not only during the next financial year but into the future as well. Just like a personal or household budget, the Federal Budget forecasts revenue and expenses to determine whether there is a surplus or deficit. It’s also a political statement setting out the Government’s intentions, priorities and new policy initiatives.
What’s in this year’s Budget?
The Government stuck closely to its pre-Budget announcement themes of infrastructure and housing affordability and, on the whole, the proposed changes were expected and mostly welcome.
Below is a summary of the key points from the Budget - from Bridges, our financial planning partner.
Please remember that these are only proposals and are subject to the passing of legislation.
- the Pensioner Concession Card will be returned to those people who lost it following the 1 January 2017 changes to the assets test
- those over 65 years of age are able to contribute up to $300,000 to their super from the sale of the family home
- tax deductions for travel expenses relating to rental properties will end
- the Temporary Budget Repair Levy will end from 1 July 2017
- First Home Super Saver Scheme of up to $30,000 for first home buyers.
Contribute the proceeds of downsizing to your super
From 1 July 2018, if you are over age 65 and sell your family home, you may have the opportunity to make a one-off contribution of up to $300,000 to your super. You will not be required to meet the work test and the normal after-tax contribution limit will not apply. To qualify, you must have lived in the home as your main residence for at least ten years. If your home is owned jointly as a couple, each of you will be able to contribute up to $300,000 to your super.
Medicare Levy Rate increases
From 1 July 2019, the Government will increase the Medicare Levy by half a per cent from 2.0 to 2.5 per cent. This is to ensure the National Disability Insurance Scheme is fully funded and to future-guarantee the Medicare system.
Low-income earners will continue to receive relief from the Medicare Levy through the low-income thresholds for singles, families, seniors and pensioners. The current exemptions from the Medicare Levy will also remain in place.
Temporary Budget Repair Levy ceases
If you are a high income earner, the Budget Repair Levy has not been extended and ceases from 1 July 2017.
Disallow the deduction for residential rental property travel expenses
From 1 July 2017, if you have a residential rental property, you will no longer be able to claim tax deductions for travel expenses related to inspecting, maintaining or collecting rent. Additionally, the rules around claiming depreciation will change so that deductions for plant and equipment will only be allowed where an expense has actually been incurred by you. This change will not prevent you from engaging third parties such as real estate agents for property management services. These expenses will remain deductible.
Reinstatement of the Pensioner Concession Card
The Government plans to re-issue the Pensioner Concession Card if you lost your entitlement as a result of the asset test changes introduced from 1 January 2017.
New activity requirements from 20 September 2018
The following changes may affect you if you receive income support from the government:
- Participation requirements for people aged between 30 to 49 will align with those aged under 30. This means the activity requirement will increase from 15 hours to 25 hours per week.
- Recipients aged 55 to 59 will only be able to meet their participation requirements with 50 per cent volunteer activities. Currently 100 per cent of their participation requirements can be met via volunteering
- Recipients aged between 60 and Age Pension age are required to meet a 5 hours per week activity requirement, but this can be met through volunteering. Currently the activity requirement is 15 hours per week.
First Home Super Saver Scheme
From 1 July 2017, super can be used to assist with saving for a first home. If you’re saving for your first home you can make voluntary contributions to super – taking advantage of the tax benefits of super – and then withdraw the money to buy your first home.
You can contribute up to $15,000 per year (from both pre and post income tax money) up to a maximum amount of $30,000 in total. Earnings can be withdrawn along with the contributions when a home is purchased.
On withdrawal, concessional contributions and earnings will be taxed at the individual’s marginal tax rate, less a 30 per cent tax rebate. Non-concessional contributions are withdrawn tax-free. First Home Super Saver accounts are created on an individual basis – meaning each member of a couple can have their own account. Importantly, the release of funds to purchase a home will not count as income for certain tests, such as HELP/HECS repayments, family tax benefits or child care benefits.
If you’re worried about any of the proposed changes or wish to discuss your financial situation with a professional, we can introduce you to a Bridges financial planner. Bridges is one of the largest national financial planning organisations in Australia, so there’s sure to be an office near you.
As a valued customer, your initial consultation with a Bridges financial planner is complimentary and obligation-free.
Call Unibank on 1800 864 864 today.