Key Budget 2017 changes impacting you

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2017 Budget Super changes

Ok we’ll be honest up front – compared to previous years Budget 2017 just wasn’t very exciting. But that’s actually a good thing for you and for us. It means that there aren’t many material changes that our clients need to worry about. Below we summarise the key changes that may affect our wonderful clients. 

Super changes

  • For those aged 65 or over who sell their home they have owned for 10 years or more, they can make a non-concessional contribution up to $300,000 per person ($600,000 for a couple) into their super from their home proceeds
    • This will not be counted to the cap and nor will you have to meet the works test
  • Our view – Be careful as this could have adverse affects in relation to Centrelink benefits if you are entitled to them. While the home is excluded from the Centrelink assets test, any net sale proceeds contributed to super would be included in the assets test

Centrelink changes

  • Government is restoring the pensioner concession card to those who lost it because of changes to the pension assets test change introduced 1 January 2017.
  • Our view – this is a good result and also clever politics

Tax changes

  • 0.5% increase to the Medicare Levy (increases from 2% to 2.5% of taxable income) 
  • Our view – The removal of the deficit levy clearly is because the deficit is now no longer a problem (Note – this is fake news, we do not believe this at all)

Housing changes

  • First-home buyers can salary-sacrifice contributions for a home deposit from pre-tax pay into their super
    • It is called the First Home Super Savers Scheme
    • First home buyers can use their existing superannuation account
    • They will pay tax at 15% when they contribute to super
    • Contributions will be limited to $30,000 per person (ie $60,000 for a couple) and $15,000 per year.
  • Our view – it is a relief to us that the Government has not allowed first home buyers to access their super accounts as has been flagged in the press prior to the Budget. 
  • Our view – $30,000 for an individual or $60,000 for a couple doesn’t represent much towards a required deposit in a major Australian city. But it’s a start. 
  • Our view – ‘First Home Super Savers Scheme’ sounds much like Labor’s old first home saver accounts (FHSA) scheme reheated. It was largely a failure and abolished by the current Government on 1 July 2015.

Investment property changes

  • For investment properties  bought from Budget day (ie purchased from 10 May 2017 onwards), investors will not be allowed to claim any deductions for travel expenses to their property (eg to the Gold Coast if the property is located there)
  • A new foreign investment levy $5k on future foreign investors who fail to occupy or lease their property for 6 months in a year
  • Increasing CGT discount to 60% for investments in affordable housing
  • Our view – The CGT discount for assets owned longer than 1 year is currently 50% so is this really a material change?

Growth projections up

  • Treasury has increased forecast for real GDP to 3% each year from 2018-19
  • Our view – this improved outlook is a positive for the Australian economy

Changes relating to small businesses

  • Extension of small business instant asset write-off scheme for one more year
    • For businesses with turnover up to $10 million
    • Allows immediately write off expenses up to $20,000 for a further year (will now finish June 30, 2018)
  • Our view – politically smart move and positive for small businesses 

Changes to our industry – banking & finance

  • Bank tax – A new bank levy of 6 basis points (0.06 of 1%) on large banks with liabilities above $100 billion
    • This will exclude customer deposits of less than $250,000
    • Measure forecast to raise $6.2 billion over the forward estimates to support budget repair.
  • Our view – this effective tax will be passed on to consumers by the banks whatever the Government may say. 
  • Government will establish the Australian Financial Complaints Authority in response to the Ramsay review
    • It will be one-stop dispute resolution body for consumers and small businesses to resolve disputes and it will be overseen by ASIC
  • Our view – this measure (and the next two below) are aimed squarely at blunting the arguments for a Royal Commissions into the banks
  • Introduction of a new Banking Executive Accountability regime
    • Senior executives & directors of authorised deposit-taking institutions (ADIs) (eg that is all banks) will be required to be registered with APRA
    • The ADI/bank will have to advise APRA prior to making any senior appointment so APRA will have visibility of all ADI senior appointments
    • Penalties will be imposed on banks that don’t monitor the suitability of their executives to hold senior positions and new mandatory reporting requirements will also be introduced
  • The Productivity Commission will commence a review (1 July 2017) of the state of competition in the financial system
  • From 1 July 2017 purchases of digital currency will no longer be subject to the GST (digital currencies treated like money for GST purposes)
  • Our view – Bitcoin anyone? 

Other issues

  • The Government has jettisoned $13 billion of “zombie measures” from the 2014-15 and 2015-16 budgets
  • Reintroduction of indexation for certain items on the Medicare Benefits Schedule
  • Confirmed funding arrangements for the NDIS
  • Additional $18.6bn in school funding over the period to 2027
  • Our view – we can’t remember what they were and you probably can’t either. But it seems they are now dead, dead dead. 

Sources: Budget Papers 2017/18, Budget Speech 2017/18, AICD analysis, FPA, SMSFA, 

About The Independent Financial Advisor

My name is Tim Mackay and I am The Independent Financial Advisor. I advise pre-retirees and retirees on how to manage their family's wealth and to fund their dream retirement.

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