2017 Federal Budget Impact on Individuals and Families: Many of the changes announced in this year’s budget focussed on fairer funding for individuals and families, with changes to medicare, pharmaceutical and GP funding, school funding and university fees, childcare affordability and changes to housing affordability schemes and more.
High Income Earner Tax Changes
High income earners who earn over $180,000 will no longer pay the 2% budget deficit levy – this will cease at the end of the 2016/17 year.
Individual tax rates for the 2016/17 year and the 2017/18 year will be as follows (excluding the medicare levy):
The Medicare levy will increase to 2.5% from 1 July 2019, to enable the NDIS to be fully funded and allow the establishment of the Medicare Guarantee Fund to boost the PBS funding into the future, and the Medicare levy low-income thresholds will increase from the 2016/17 year:
- The threshold for singles will increase to $21,655 (up from $21,335 for the 2015/16 year).
- The family threshold will increase to $36,541 (up from $36,001 for the 2015/16 year).
- For single seniors and pensioners, the threshold will increase to $34,244 (up from $33,738 for the 2015/16 year). The family threshold for seniors and pensioners will increase to $47,670 (up from $46,966 for the 2015/16 year).
- The child-student component of the income threshold for all families will increase to $3,356 (up from $3,306 for the 2015/16 year).
GP’s will continue to receive incentives to bulk bill children up to 16 and concession card holders, and from 1 July 2018 consultation items will be indexed – increasing the Medicare contribution to GP and specialist consultations. Specialist procedure and allied health items will be indexed from 1 July 2019 and from 1 July 2020 certain diagnostic imaging items will be indexed.
The Government will maintain the bulk billing incentives for pathology and diagnostic imaging services including blood tests, xrays and scans.
An additional $2.8 billion has been allocated to public hospitals in the budget.
The no-jab No Pay policy introduced earlier this year is set to continue to improve childhood vaccination rates with FTB part A payments reduced by $28 per fortnight for each unvaccinated child.
More money is available to support mental health support and prevention and medical research funding is increased with $65.9 million to fund new research and clinical trials with $5.8 million specifically for research into childhood cancer.
The NDIS will be delivered in full by 2020, largely funded by Medicare increases.
The Government’s commitment to provide more affordable child care to working families has been ratified with $37.3 billion to help ease cost of living pressures for child care including before and after school care. From 2 July 2018 the single simplified means-tested child care subsidy will provide support for families who most need it, and increased funding for early childhood education for the 2018 school year will ensure preschool services are available.
School and University Funding
School funding is set to shift with $18.6 billion in extra funding for schools, and a change in its distribution moving to a needs-based model to make it fairer for all schools.
University fees are set to rise with the average degree increasing 7.5%, which will commence from 2018 and be phased in over 4 years. Repayments of student loans will also be required sooner, cutting in when graduate income reaches $42k per annum requiring a 1% repayment rate, and the maximum threshold of $119,882 with a 10% repayment rate will also be introduced.
Housing Affordability will be addressed through providing more stock from the commonwealth land bank to increase available supply, and enable first home buyers to save through pre-tax contributions to a special superannuation account being taxed at the lower rate of 15%, with a maximum contribution allowed of $15k per year over 2 years ($30k in total). Both members of a couple can take advantage of the scheme. A new 50% cap on pre-approved foreign ownership of new developments will also come into effect.
Home buyers who purchase newly constructed residential properties (or new subdivisions) will be required to remit the GST directly to the Tax Office as part of settlement. Previously the GST was to be remitted by developers, however many were failing to remit these funds.
Foreign owners will pay increased capital gains tax on investment properties and will face higher fees if their property remains vacant and unavailable for the rental pool.
The government will also be disallowing deductions for travel expenses related to owning a residential investment property.
Banking Sector Fees
Changes in the banking sector will see consumers better protected with new rules around the provision of insurance products, and changes in the credit card market around the provision of credit cards. Banks will also be required to pay a levy on liabilities above $100 billion making the industry more competitive for smaller banks. Superannuation funds and insurance companies will not be subject to the levy.
Welfare Changes and Return to Work Support
Escalating financial penalties for welfare recipients who persistently fail to meet their participation requirements will be introduced. Some welfare payments are being consolidated and some new welfare recipients will be subject to random drug testing. Those who test positive will have their payments quarantined.
A range of initiatives will be introduced to support parents of young children prepare to re-enter the workforce.
Seniors who lost their pensioner concession card earlier this year will have that benefit restored, and older Australians will get a one-off $75 power rebate for singles and $125 for couples. Those over 65 who downsize their home can pour up to $300k of the proceeds into their superfund. Over 60’s on welfare will now have to complete 10 hours of approved activity a fortnight (which can include volunteering) to retain their benefits.
Roll Your Own Tobacco and cigars will be taxed at the same rate as manufactured cigarettes. This will be phased in over four years.