Budget(s) 2017

Posted by: Alan Rimmer 2 months, 2 weeks ago

Budget (Bud_Jet)  n. Eagerly anticipated annual event that gets Trump off the front pages for a couple of days and then is gone and forgotten.

So how did this one rate financial planning-wise?

Downsizer’s Super Contribution

From 1 July 2018, people aged 65 and over will be able to make a non-concessional superannuation contribution of up to $300,000 from the proceeds of the sale of their home. Both members of a couple will be able to apply this measure allowing up to $600,000 per couple to be contributed to superannuation. This only counts if you have owned the home for 10 years, and fortunately, does not form part of the $1.6M cap.

Scorecard: Pretty good actually. Drawing on home equity in retirement years is something many of us will face, and this is as good a way as any to manage it. 9/10.

First Home Super Saver Scheme

From 1 July 2017, the government will allow voluntary superannuation contributions to be withdrawn for a first home deposit. People can make voluntary contributions of $15,000 per year, up to a maximum of $30,000 total.

 From 1 July 2018 these amounts can be withdrawn for a first home deposit up to the maximum of $30,000 along with associated deemed earnings. There is a tax concession if the withdrawals are from concessional contributions, and no tax payable if they are from non-concessional contributions. Also, couples can utilise the scheme together, allowing for $60,000 to be withdrawn in this manner.

Scorecard:        A similar proposal some years back withered on the vine through lack of uptake. Wonder how this will go. Its benefits are variable depending on individuals’ circumstances, and therefore difficult to quantify. i.e. confusing for potential users. It is likely to push up housing prices by a leveraged factor of the benefit amount. And typically, governments totally ignore the cost of administration as being someone else’s problem – i.e. super funds and their members. To the extreme discontent of ARA and its clients we’ve learned that super fund administration is fraught with complication without such annual increments.  3/10

Pensioner Concession Card Reinstatement

Centrelink age pensioners who had their pensions cancelled on the 1 January 2017 because of Centrelink’s new assets test were automatically sent non-income tested Low Income Health Care Cards and Commonwealth Seniors Health Cards.  The Government has decided that, from the 9 October 2017, it will reinstate the Pensioner Concession Card (that’s the concession card you get with the age pension) to those pensioners who had their pensions cancelled on the 1 January. In an uncharacteristic show of generosity, not seen since Moses was a boy, the Government will allow those pensioners to also retain their Commonwealth Seniors Health Card. This is to ensure they continue to receive the Energy Supplement which comes with that card, however their Low Income Health Care Card will be deactivated.

Scorecard:        No brainer. Thank you. 10/10

Energy Assistance Payment

The Government will make a one-off Energy Assistance Payment of $75 for single recipients and $125 per couple, automatically paid in the week commencing 26 June 2017 to anyone receiving the Age Pension, Disability Support Pension, the Veterans’ Service Pension and the Veterans’ Income Support Supplement, Veterans’ disability payments, War Widow(er)s Pension, and permanent impairment payments under the Military Rehabilitation and Compensation Act 2004 (including dependent partners) and the Safety, Rehabilitation and Compensation Act 1988.

Scorecard:        Ditto for those eligible. 10/10

Medicare Levy

There will be a 0.5% increase in the Medicare levy from 1 July 2019.

Scorecard:        When is a tax not a tax? When it’s a levy, and you’ve made a dumb promise about not raising taxes. Not even worth scoring.

With the Federal Budget hogging the limelight,the Victorian State Budget snuck though almost un-noticed. But there are some items worthy of note, including:

  1. The Off-the-Plan property Stamp Duty Concession will be abolished from 1 July 2017. Contracts signed pre-30 June 2017 will continue to have the concession applied;
  2. Stamp Duty exemptions for inter-spousal transfers will be removed from 1 July 2017. Inter-Spousal Stamp Duty Exemptions will however continue to apply for transfer of principal place of residence or assets transferred because of the breakdown of a relationship;
  3. Effective for the 2017 calendar year, an additional 1% Land Tax will apply to properties that have been left unoccupied for a period of more than six months of the calendar year; and
  4. Stamp Duty payable on the acquisition of new passenger vehicles increases from 1 July 2017 by 1% to 4.4%.

As our resident lawyer Emily points out, the inter-spousal exemption one is quite a surprise as its existence almost pre-dates marriage! If for some reason transferring property between spouses was on your agenda, get in touch without delay and Emily will help out.

Posted May 12, 2017

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