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PERSONAL TAXATION - 2017 FEDERAL BUDGET

Wednesday, 10 May 2017

The Budget will raise $8.2 billion over the four year Forward Estimates by increasing the existing Medicare levy across all incomes

Increase in the Medicare levy

The Government will increase the Medicare levy by half a percentage point from 2.0 to 2.5 per cent of taxable income from 1 July 2019.

The Government estimates the increase will raise an additional $8.2 billion in tax revenue over the forward estimates period
Funds raised by the increase will be used to ensure the National Disability Insurance Scheme (NDIS) is fully funded. Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased.

The Government will use all revenue generated by the Medicare levy to support the NDIS and to guarantee Medicare. In particular, the Government will credit $9.1 billion over the forward estimates

The Budget says this is the net impact across all heads of revenue, not just the Medicare levy.

 

Increasing the Medicare levy low-income thresholds

The Government will increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners from the 2016-17 income year.

The increases take account of movements in the CPI so that low-income taxpayers generally continue to be exempted from paying the Medicare levy.

The threshold for singles will be increased to $21,655. The family threshold will be increased to $36,541 plus $3,356 for each dependent child or student. For single seniors and pensioners, the threshold will be increased to $34,244. The family threshold for seniors and pensioners will be increased to $47,670 plus $3,356 for each dependent child or student.

This measure is estimated to have a cost to revenue of $180.0 million over the forward estimates period

 

Family Tax Benefit Part A

The Government will achieve savings of $415.4 million over five years by implementing a consistent 30 cents in the dollar income test taper for Family Tax Benefit Part A families with a household income in excess of the Higher Income Free Area (currently $94,316) from 1 July 2018, the Budget says.

This will ensure that higher income families are subject to the same income test taper rates.
Family Tax Benefit Part A payments will also be affected by the introduction of new compliance arrangements for the No Jab No Pay (NJNP) and Healthy Start for School (HSS) policies, to ensure that all families receiving Family Tax Benefit (FTB) Part A are encouraged to meet immunisation and health check requirements.

From 1 July 2018, families who do not meet the NJNP and HSS requirements will have around $28 per child withheld from their fortnightly rate of FTB Part A.

 

Capital gains tax discount on affordable housing

The Government announced the capital gains tax discount for investments in affordable housing will be increased to 60 per cent.

This and other measures will also support State, Territory and local governments imposing inclusionary zoning requirements on new development sites and provide more vehicles for superannuation funds to invest in affordable housing, the Budget said.

 

Downsizing superannuation concession

The Government will encourage older Australians to free up housing stock by enabling downsizers over the age of 65 to make a non-concessional contribution of up to $300,000 into their superannuation fund from the proceeds of the sale of their principal home.
Mum and dad investors will continue to be able to use negative gearing, supporting the supply of rental housing and placing downward pressure on rents.

Regulatory agencies will continue to use their flexible and calibrated controls.

Mr Morrison said the Government will legislate to extend APRA’s ability to apply controls to the non-ADI sector and explicitly allow them to differentiate the application of loan controls by location.

Even tougher rules on foreign investment in residential real estate will be introduced, removing the main residence capital gains tax exemption, and tightening compliance.

There will be an annual foreign investment levy of at least $5,000 on all future foreign investors who fail to either occupy or lease their property for at least six months each year.

 

Click below to view source

Budget Paper 2 Part 1 Revenue Treasury page 24

Budget Paper 2 Part 2 Expenses Social Security page 157

Budget Paper 2 Part 1 Revenue Treasury page 24

Budget Paper 2 Part 1 Revenue Treasury page 24, 25

Budget Paper 2 Part 2 Expenses Social Security page 157

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