This is a Federal Budget that targets the proverbial Maslow’s hierarchy of needs for middle Australia – housing, education and health.
The Budget announcements contain a suite of tax and superannuation measures aimed at increasing housing stock and improving housing affordability. While the Government has not gone close to clamping down on the political and social hot potato of negative gearing, it has taken some steps to restrict the travel expense and depreciation tax breaks enjoyed by investors. Significantly, curtailing these deductions only applies to residential properties and not commercial properties, these are measures to help Australians who aspire to own their own home compete against investors in the housing market.
The Government’s higher education reform package has been widely discussed in the weeks leading up to Budget night. On the tax front, as predicted, HELP debt repayment thresholds have been lowered significantly. This news will not been pleasing to current, recent and prospective tertiary students, especially in an era of low wage growth and high housing prices. The Government has also committed extra funding for schools.
Infrastructure and health initiatives are staples of every Federal Budget and this year is no different. As usual, with large-scale national interest commitments, the Government giveth, and the Government taketh away. Last year, many individual taxpayers received token “cake and coffee” tax cuts which were touted as an important first step to addressing bracket creep; but one year later, the Government announces that the Medicare Levy will increase by 0.5% to 2.5% which will surely eat into those tax cuts (for those lucky enough to have received them). The higher Medicare Levy will go towards funding the NDIS and a new Medicare Guarantee Fund.
Last year’s budget rained favours upon small businesses. This year, the small gift is a one year extension of the $20,000 instant asset write-off for 2017-18. Unfortunately, the Government will tighten access to the small business CGT concessions. For larger businesses, the Government will again try valiantly to push the rest of its 10-year company tax cut plan through a Senate that was unwilling to give those tax cuts to companies with turnovers exceeding $50 million a mere 6 weeks ago.
In a non-election year, there have not been too many sweeteners, but a focus on balancing the budget. The attempts to improve housing affordability are certainly to be applauded – time (and housing prices) will tell whether they hit their mark.
Register for the May MTU webinar and see how these changes influence your practice.
May 12th