2017 Federal Budget Summary

19 May 2017

The announcements in this update are proposals unless stated otherwise. These proposals need to successfully pass through Parliament before becoming law and may be subject to change during this process.

Budget projected to return to balance in 2020–21 and remain in surplus over the medium term
Growing consensus that the global economic outlook is improving
Non-concessional contributions (personal) to superannuation funds of up to $300,000 allowed from sale of principal residence
First-home buyers allowed to save a deposit through voluntary contributions to superannuation
No changes to negative gearing or capital gains tax
The Medicare Levy will increase by 0.5 % to 2.5 % of taxable income on 1 July 2019
Pensioners will receive a one-off energy bill payment of $75 for singles and $125 for couples proposed to be paid from 20th June 2017
The pensioner concession card will be restored to those affected by the pension assets test change 1 January 2017
No material changes to Aged Care
Education funding set at $18.6 billion over 10 years
University student fees will increase by 7.5 % by 2021
University graduates will start repaying their loans when they reach an income level of $42,000 a year, down from $55,000

Overview

The economic plan Treasurer Scott Morrison delivered on Tuesday 9 May has housing affordability as the centrepiece. His 2017 Federal Budget had a number of significant announcements:

Allowing non-concessional contributions for those downsizing the family home
Using superannuation to help fund the deposit for first-home buyers
Increasing the Medicare Levy by 0.5%
Changes to eligibility for concession cards and income support payments.

Contribution of home sale proceeds into super

From 1st July 2018 Australians over the age of 65 will each be able to make a non-concessional (personal) contribution of up to $300,000 into their superannuation fund from the proceeds of the sale of their principal home.

The principal residence needs to have been owned for at least 10 years.

Pensioner Concession Card

The Pensioner Concession Card will be reinstated for those pensioners who were no longer entitled to the pension following the changes to the pension assets test from 1 January 2017. It is proposed that the PCC are reinstated after 9th October 2017.

First-home buyers

First-home buyers will be able to use voluntary contributions to their existing superannuation funds to save for a house deposit. Contributions can either be concessional contributions (pre tax) or non-concessional (personal post tax contributions). The earnings will be taxed at 15%, rather than marginal rates, and withdrawals will be taxed at their marginal rate, less a 30% tax offset. Contributions will be limited to $30,000 per person in total and $15,000 per year. Both members of a couple can take advantage of the scheme.

Non-concessional contributions will not benefit from the tax concessions apart from earnings being taxed at 15%.

Negative gearing

There were no changes to negative gearing but from 1 July 2017, accommodation and travel deductions for residential rental property will be disallowed and plant and equipment depreciation deductions for residential investment properties will be restricted to only those expenses directly incurred by investors.

University fees

University fees will rise by $2,000 to $3,600 for a four-year course and students will have to start paying back their debt when they earn more than $42,000 from July next year, down from the current level of $55,000.

Medicare Levy

In health care, the Medicare Levy will increase on 1 July 2019 by 0.5% to 2.5% of taxable income to help fund the $22 billion National Disability Insurance Scheme (NDIS). The Treasurer says all Australians have a role to play in supporting the disability scheme, even if they aren't directly affected.

What’s next?

Most changes must be legislated and passed through Parliament before they apply. If you think you may be impacted by some of the Budget’s proposed changes, you should consider seeking professional advice. We can give you a clear understanding of where you stand and how you can manage your cash flow, super and investments in light of proposed changes.