Treasurer hands down Budget for 17/18 year
Light Flown 1 by Matthew Johnson, oil on linen, 150 x 170 cm
Treasurer hands down Budget for 17/18 year
On Tuesday 9 May 2017 Treasurer Scott Morrison handed down the 2017-18 Federal Budget, his second Budget.
In his Budget Speech the Treasurer reported a deficit of $29.4bn for 2017-18. However, the government forecasts this to improve to a surplus in of $7.4bn by 2020-21. The Budget expects the economy to grow at 2.75% in 2017-18 and 3.0% in 2018-19, supported by growth in household consumption, exports and a transition to non-mining business investment.
These figures have been criticised by some in the press and economists as being too optimistic and are contingent on the government passing a lot of its measures through the difficult Senate.
As far as taxing measures go, the main issues that interest us are:
- The instant asset write-off ($20,000 threshold) for small business entities (SBEs) will be extended by 12 months to 30 June 2018.
- The Medicare levy will be increased by 0.5% to 2.5% from 1 July 2019.
- Faster higher education repayment and threshold changes from 1 July 2018. Currently, HECS repayment cuts in when the income reaches $54,125. This threshold will now change to $42,000 from 1 January 2018.
- The 2% budget deficit levy on incomes over $180,000 will not be extended beyond its initial 3 years. The levy will therefore cease at the end of the 2016-17 financial year. This means that the maximum rate of tax will decrease from 49% to 47% (not including Medicare).
- The government will increase the Medicare levy to 2.5% from 1 July 2019 (up 0.5% from the current 2% Medicare levy) to ensure the National Disability Insurance Scheme (NDIS) is fully funded and to guarantee Medicare.
- In the 2016-17 financial year, the reduced corporate tax rate of 27.5% will apply for businesses with an aggregated turnover of less than $10m; $25m turnover in 2017-18; and $50m turnover from 2018-19. This effectively implements the first 3 years of the government's 10-year plan for company tax cuts.
- The government will extend the taxable payments reporting system (TPRS) to contractors in the courier and cleaning industries. This is the system whereby the ATO seeks to clamp down on people not declaring income from various industries prone to cash transactions. The system was first introduced for people in the building and construction industry.
- The government will provide $32m for one year of additional funding for Australian Tax Office audit and compliance programs which target the black economy.
- From 1 July 2017, the government will limit "plant and equipment" depreciation deductions to outlays actually incurred by investors in residential real estate properties. Investors who purchase plant and equipment for their residential investment property after 9 May 2017 will be able to claim a deduction over the effective life of the asset. However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property.
- Travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed from 1 July 2017.
- From 1 January 2018 the Capital Gains Tax discount for individuals will be increased from 50% to 60% for gains relating to investments in qualifying affordable housing.
To qualify for the higher discount, housing must be provided to low to moderate income tenants, with rent charged at a discount to the private rental market rate. Tenant eligibility will be based on household income thresholds and household composition.
- The government will allow a person aged 65 or over to make a non-concessional contribution to their superannuation fund of up to $300,000 from the proceeds of selling their home from 1 July 2018. These contributions will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6m total superannuation balance test for making non-concessional contributions (which applies from 1 July 2017).
- The government will encourage home ownership by allowing future voluntary contributions to superannuation made by first home buyers from 1 July 2017 to be withdrawn for a first home deposit, along with associated deemed earnings. Concessional contributions and earnings that are withdrawn will be taxed at marginal rates, less a 30% offset. Combined with the existing concessional tax treatment of contributions and earnings, this will provide an incentive that will enable first home buyers to build savings more quickly for a home deposit.
- For those selling properties, there will be the need to obtain a foreign resident capital gains withholding certificate for sales of property exceeding $750,000 (previously $2,000,000). The objective of the rules is to assist in the collection of foreign residents' CGT liabilities,
The Arts sector
The budget will end the two-year experiment of the National Program for Excellence in the Arts which was the program that upset many in the arts industry, administered by Senator Brandis.
This has been replaced by the Catalyst Program which sought to redress the funding to the arts under Minister for Communications and the Arts, Mitch Fifield
With the winding-up of the ministerial grants program, federal funding to the Australia Council is expected to increase from $196.6m this year to a projected $209.2m. In all, $80.2m will be returned to the agency across four years, comprising Catalyst grants, unspent money and previously returned funds. A final round of Catalyst applications is still being assessed.
It is some improvement on the old scheme but remains well short of the $220m high that followed Labor’s last Budget.
As we have constantly demonstrated in our past editions of our Newsletter, the Coalition has shown no inclination to assist the arts in anyway and in this case again, it can be shown that they have not increased the base level of arts funding. The picture is grim if you look at the trend across the past decade. Figures produced by the National Association for the Visual Arts (NAVA) show an erosion of real arts subsidy per capita by 17.5 per cent since 2008. Support for the arts is being left behind as the economy and the population grows.
While Minister for Communications and the Arts, Mitch Fifield has stated his willingness to consider policy ideas generated by the arts sector, these creative ideas should not be considered by government in isolation but as part of a larger examination of the creative economy, its sustainability and prospects for growth. After the debacle of the past two years that has included funding shuffles and wind backs, the government has shown that there is no clear policy direction - for which the arts sector is still crying out.