On Tuesday night, Treasurer Scott Morrison handed down the Federal Budget for 2017. In his second delivery, he presented a budget of “principles of fairness, security and opportunity”. Morrison’s budget is one that many believe will be popular, with measures included to assist First Home Buyers with the difficult task of saving for a deposit, heavier penalties for banks taking on too much debt, and an extension of the $20,000 asset liability write off scheme for small business. In place of cutting back on spending, the government has chosen to rely on raised taxes to get Australia’s budget back to surplus by 2021. So what does it all mean for you?
What it means for individuals:
Working individuals and families will have higher tax rates imposed on them as a result of this budget. However, there are some wins overall, including a boost to First Home Buyers giving Independent Professionals more opportunity to save for their first home in a tax effective manner via contributions.
- The budget emergency appears to have eased, so the 2% Budget Repair Levy will cease from 1 July 2017, reducing tax for those with taxable incomes over $180,000.
- Partially offsetting this will be an increase in the Medicare levy by 0.5% to 2.5% from 1 July 2019 to improve funding for the National Disability Insurance Scheme (NDIS).
- Medicare Freeze will end from July 2018 meaning the rebate amount will go up, which is a win for individuals and families
- First Home Buyers will be allowed to salary-sacrifice into their Super in order to save for a deposit faster. They will be able to contribute a total of $30,000 into their super, on top of compulsory contributions, or $15,000 per year
- The salary threshold limit University graduates have to reach before being required to repay student loans goes down to $42,000 a year, from $55,000.
- Increased capital gains discount to 60 per cent for investments in affordable housing
- The Paid Parental leave scheme will remain untouched for now, in a to boost working families’ incomes
- The government is investing $37.3 billion dollars in the Jobs for Families Child Care Package, a scheme designed to support working families with lower childcare costs and support early learning opportunities for children. Childcare Subsidy will be limited to families with income up to $350k.
- Change to negative gearing- The government has moved to disallow travel expenses from 1 July 2017 to investment properties for maintaining, inspecting or collecting rent. Depreciation deductions on plant and equipment will be limited to new plant and equipment purchased by the investor.
What it means for small to medium sized business owners:
- All time low company tax rates for businesses with an annual turnover of up to $10 million (27.5%), as well as lower rates for companies with an annual turnover of below $50 million
- Up to $300 million will be provided to States and Territories to remove unnecessary regulatory barriers red tape to encourage and assist small business through a National Partnership on Regulatory Reform.
- A new national skills fund will be established to train and support apprentices
What it means for Large Organisations:
Multinationals will be under increased scrutiny with the 2017 Budget providing for extended funding for investigative taskforces, as well as a crackdown on organisations avoiding tax obligations.
Banks also have been affected, and Australia waits to see how this will play out (or rather, how this will be passed on to consumers). The government is expecting these measures to recoup $4 billion in tax in the coming financial year.
- The ATO’s Black Economy taskforce has had its funding extended
- Multinational anti-avoidance laws extended in order to stop tax avoidance by using foreign trusts and other corporate structures
- Top 5 banks in Australia with liabilities of over $100 billion will be slugged with an annual levy of 0.06 per cent
- Heavier fines for Banks and Financial Institutions for misconduct
What it means for Migration:
With the 457 Visa having been abolished, Morrison has also created new levies for foreign workers on temporary or skilled visas, replacing existing employer requirements. Here’s a summary of what to expect:
According to the Migration Institute of Australia, from March 2018, businesses with turnover of less than $10 million per year will be required to:
- Make an upfront payment of $1,200 per visa per year for each employee on a Temporary Skill Shortage visa
- A one-off payment of $3,000 for each employee being sponsored for a permanent Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa.
Businesses with turnover of $10 million or more per year will be required to:
- Make an upfront payment of $1,800 per visa year for each employee on a Temporary Skill Shortage visa
- A one-off payment of $5,000 for each employee being sponsored for a permanent Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa.
This may also provide more incentive to assist workers to move to a permanent visa once they have started work and are contributing well to the business and have made a commitment to remain in Australia permanently. Read more on the Migration changes here.
In summary I think we can agree there are some small wins for individuals, working families and small business, the government has delivered a budget that is geared towards promoting growth, repaying national debt and, hopefully, a stronger economy for Australia in the coming years.