Federal Budget 2017-18 Highlights
On 9 May, the Government delivered its Federal Budget 2017/18. There were no major announcements that will affect existing salary packaging or novated leasing arrangements.
So what are the key take outs?
The main measures affecting most Australians are:
- the Medicare levy jumps to 2.5 per cent from July 2019
- From July 2017 first-home buyers can save toward a deposit in their super
- From July 2018 seniors can add $300,000 extra to their super if they sell their home
- From July 2018 university students have to pay their HELP debt earlier
These proposed changes are subject to approval in the Australian Parliament.
Increase in Medicare Levy
The Government will increase the Medicare levy from 2 per cent to 2.5 per cent of taxable income from 1 July 2019 so the government can fully pay for the National Disability Insurance Scheme, which is on track to be rolled out from 2020.
You’ll only be exempt if your income is below the threshold of $21,655 for singles, $36,541 for families and $34,244 for pensioners.
Medicare Guarantee Fund
The Government is introducing a new Medicare Guarantee Fund to ensure ongoing funding of essential healthcare benefits is guaranteed. Proceeds from the Medicare levy, less the portion set aside for the National Disability Insurance Scheme, will be paid into the Fund and topped up with a portion of personal income tax receipts.
Medicare Rebate Freeze
The Medicare Rebate Freeze will be gradually lifted to provide $1 billion over four years from 2017-18, starting with bulk billing incentives for GPs in July 2017, moving on to specialist consultations in 2018, specialist procedures in 2019 and diagnostic imaging in 2020.
More than $200 million will be provided to establish an independent NDIS Quality and Safeguards Commission to oversee the delivery of quality and safe services for all participants of the NDIS. The Commission will perform three core functions: regulation and registration of providers; complaints handling; and reviewing and reporting on restrictive practices.
The Government will also invest $33 million over three years to help existing service providers in the disability and aged care sectors grow their workforce. This package will deliver jobs for Australians in rural, regional and outer suburban areas that require strong workforce growth as a result of the NDIS roll out
University funding will be cut by $2.8 billion over four years. Students will face a 7.5 per cent tuition fee increase, phased in over four years starting in 2018. Income thresholds and repayment rates for HELP debts will increase from January 1, 2018. Graduates will start repaying their loans at a lower income threshold of $42,000 instead of $55,874. High income earners (over $119,882) will pay 10 per cent of their income instead of eight per cent.
First Home Super Saver Scheme
From 1 July 2017, first home buyers will be given the option of piggybacking on their superannuation through the First Home Super Saver Scheme. This will allow savers to salary sacrifice up to $15,000 per person in a single year and $30,000 in total from their pre-tax income to go towards a first home deposit.
It will receive the same favourable tax treatment going in and out as superannuation. The government says when it’s time to cash out, the scheme will leave savers about 30 per cent better off overall than if they went with a typical deposit savings account.
The Government also wants to free up housing by encouraging older Australians to downsize. From 1 July 2018, a person aged at least 65 will be able to make an additional non-concessional contribution into their super of up to $300,000 ($600,000 for a couple) from the sale of their home. This is in addition to any other contributions they are eligible to make.
National Housing and Homelessness Agreement
The Government will establish a new National Housing and Homelessness Agreement with State and Territory governments to deliver more affordable housing. The aim of the new national agreement is to reward States that meet housing supply targets that better keep pace with demand, including targets for social and affordable housing.
Marginal tax rates
From the 2016/2017 tax year onwards, the 37% marginal tax rate will takes effect where taxable income exceeds $87,000. For previous financial years (before July 2016), the threshold for the 37% tax rate is $80,000.
From 1 July 2017, the top marginal rate will drop back to 45%, from the previous rate of 47%.
|Income||Marginal Tax Rate||Tax Payable|
|$0 – $18,200||0%||Nil|
|$18,201 – $37,000||19%||19 cents for each $1 over $18,200*|
|$37,001 – $87,000||32.5%||$3,572 plus 32.5 cents for each dollar over $37,000|
|$87,001 – $180,000||37%||$19,822 plus 37 cents for each dollar over $87,000|
|$180,001 and above||45%||$54,232 plus 45 cents for each dollar over $180,000|
Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased. The Temporary Budget Repair Levy (2% on taxable incomes over $180,000) will expire next month on 30 June 2017.
You can find a detailed breakdown of the Government’s social and political priorities and how it intends to achieve them at www.budget.gov.au