How will the 2017-2018 budget affect you?

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The 2017-2018 Federal budget was handed down last Tuesday on the 9th of May, with a deficit of $29.4bn. However, the Government is confident that the economy will experience a strong comeback by 2020-2021, thanks to a variety of measures to be used in these coming years

If you’re a small business owner with a turnover between $2 million and $10 million…
You have another 12 months in which you can instantly write-off purchased assets (with a threshold of $20,000) until 30 June 2018, assuming your assets have been used or are ready for use by this date. Small business owners can take advantage of having an immediately lowered tax liability in the current year as it frees up business cash flow and enables immediate reinvestment – contact your tax agent to talk about how to maximise this advantage.

If you’re a university student or new graduate…
You’ll have to start repaying your debt sooner from 1 July 2018, as soon as your income passes $42,000 per annum instead of the previous threshold of $55,874. As a consolation, the minimum repayment rate from next year is 1% – lower than the current mandatory repayment rate of 4%. High income earning graduates however, don’t benefit; the maximum threshold will decrease from $119,882 to $103,766, while the repayment rate increases from 8% to 10%.

If you’re a homeowner looking to invest…
You can access a 60% discount in your Capital Gains Tax (CGT) if the house you choose to invest in is provided to tenants with low to moderate income at a rate below the market rate. As another bonus, investments like this will be managed by a government registered community housing provider, freeing up your time and resources. However, you must own this property for a minimum of 3 years.

If you’re a current or soon-to-be retiree…
Up to $300,000 of the proceeds from the sale of your principal residence can be contributed to your super fund if you are aged 65 or over, allowing your home to be passed to new generations of families while also looking after your retirement.

If you’re an investor or tax resident based from outside of Australia…
You will find investing in Australia more expensive. Previously, main residences were exempt from Capital Gains Tax upon being sold and empty properties did not incur charges. However, this Budget will see at least $5,000 being charged on foreign-owned residential property that is not occupied for at least 6 months per year, and if you’re looking to develop, foreign ownership is limited to 50%.

If you’re just starting off in the property market…
You may find relief in knowing that first homebuyers can now voluntarily ‘save’ money inside their super fund (up to $15,000 per year and $30,000 overall) from 1 July 2017, and then withdraw this money from 1 July 2018. This can be a faster way of saving up for a deposit as contributions and subsequent earnings will be taxed at 15%. You should note that withdrawals of this money will be taxed at the (often higher) marginal rate – however, you do get a 30% offset.

If you’re any other Australian Citizen…
You will have to pay a higher Medicare levy from 1 July 2019, bumped up from 2% to 2.5%. This is estimated to raise $8 billion to fund health care and subsidise the singles, families, seniors and pensioners who fall under the low-income threshold.

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