Last night saw treasurer Scott Morrison unveil the federal government’s budget for the 2017/18. There were some surprises and some announcements that were widely expected. Below we look at some of the measures that are likely to be of most interest to small business owners.
Income Tax Changes
Increase to Medicare Levy – It was announced that the Medicare Levy is to increase from 2.0% to 2.5% from 1st July 2019. Whilst the government would have you believe they are not increasing income taxes a levy is just another name for a tax in most people’s language! For those with a taxable income of $50,000 this represents a $250 tax increase and $500 for $100,000 taxable income.
Changes to Negative Gearing – whilst stopping short of removing negative gearing the government has announced that for properties purchased after budget night (9th May 2017) owners will no longer be able to claim travel costs in relation to the property nor depreciation deductions on plant and equipment unless the owner has bought the asset directly i.e. it is not included in the purchase price.
Higher Education Loans – As previously announced it is planned to accelerate the repayment of higher education (HELP) loans.
Temporary Budget Repair Levy – There was speculation that this would be extended but is has been confirmed that this will cease as originally proposed on 30th June 2017. This was an additional levy of 2% being paid by those earning more than $180,000.
Small Business Immediate Asset Write Off – as many had expected this has been extended for another twelve months. This enables small businesses (turnover under $10 million) to claim an immediate deduction for most purchases of depreciable assets under $20,000.
Visa Levy for Foreign Workers – this will impact those businesses who employ foreign workers on temporary visas or permanent pathway visas (subclasses 186 and 187). The levy is $1,200 per annum for each employee on a temporary visa for businesses with a turnover under $10 million and $1,800 for those over $10 million. For permanent pathway visas it is one-off payments of $3,000 per employee for businesses with a turnover under $10 million and $5,000 over $10 million.
Extending the Taxable Payments Annual Reporting (TPAR) – the building industry has been required for a number of years to report payments to contractors each year. It has now been announced that from 1st July 2018 this will be extended to the cleaning and courier industries.
First Home Buyers will now be able to make pre-tax contributions of up to $15,000 per annum up to a total of $30,000 to superannuation. These will then be able to released along with associated earnings to be used towards a deposit on a house.
Increased Contributions for Downsizers – From 1st July 2018 those aged over 65 who downsize their homes will be eligible to make an additional non-concessional contribution of $300,000 from the proceeds to superannuation above their usual contribution limits.
Removal of Main Residence Exemption – From 7:30pm on 9th May 2017, foreign residents will no longer be able to claim the main residence exemption for new properties. Existing properties will continue to be eligible up until 30th June 2019.
Increase in Foreign Resident Capital Gains Withholding – From 1st July 2017 the rate of withholding will be increased from 10% to 12.5% and the withholding threshold will be decreased from $2 million to $750,000.
For further details on any budget measures or a copy of our full budget update when it’s available please contact our office.