Muirfield Budget Update – 2017

On 9 May, Treasurer Scott Morrison delivered the 2017 Budget. Morrison touched on quite a few points and declared that Australia will return to surplus in the coming years. There are some interesting changes that may come about due to the budget, and we have highlighted these below:

 

Home Proceeds and Superannuation

In the effort to make housing more affordable, Australians over the age of 65 are being encouraged to downsize their homes. Those who downsize their principle homes will be able to make an after-tax contribution of up to $300,000 into their Superannuation regardless of age and work tests and the $1.6 million pension cap.

Interestingly, both partners in a relationship can make the $300,000 contribution, meaning that a contribution of up to $600,000 per couple can be made to super.

Of course there are a couple of caveats, for example any contribution has to come from the proceeds of the principle residence and the home has to have been owned for at least 10 years.

Centrelink Pensioner Concession Card

In a win for individuals who lost the Centrelink Age Pension as a result of the 1 January 2017 Asset Test changes the Government has announced they will now automatically receive the Pensioner Concession Card. The card entitled recipients to cheaper rates, travel, pharmaceuticals and registration among many other entitlements.

 

Medicare Levy

In order to ensure the National Disability Insurance Scheme (NDIS) is fully funded the Medicare Levy will increase to 2.5% of taxable income beginning 1 July 2019. The new thresholds after which Medicare Levy will be charged will be increased from 1 July as follows:

  New Threshold Dependent Child or Student Addition (each)
Singles $21,655
Family $36,541 plus $3,356
Single Seniors and Pensioners $34,244
Seniors and Pensioner couples $47,670 plus $3,356

First Home Deposits

Whilst this may not relate to you we thought the proposed legislation for first time home-buyers was an interesting change.

Beginning 1 July 2018 first time home buyers will have the option of withdrawing voluntary contributions to superannuation made from 1 July 2017. The voluntary contributions can then be used for a first home deposit. These buyers can save up to $15,000 a year with a maximum of up to $30,000 per person. When the savings are withdrawn, it will be taxed at their marginal rate, with a 30% tax offset.

 

Bank Levy

A 0.06% annual levy will apply to the big four banks along with Macquarie.  The new tax will be levied on various types of borrowing that banks use to fund their lending.  If passed by Parliament the levy is forecast to raise approximately $1.5 billion per year over the next 4 years following the intended introduction on July 1.

 

There are several other measures that were released in Morrison’s Federal Budget and it will be interesting to see how they progress. Much of the information on the changes is not yet clear, and much of it will remain so until the legislation has passed parliament. We will continue to keep you updated as more information is released.

16 Comments

  1. Mark O'Connor on May 11, 2017 at 11:22 am

    At the end of the day someone always has to pay. I this case the big 4 +Macquarie will pass on this levy to their share holders dividends.
    So independent retirees will foot the bill for the levy.
    Given the profits of the big 4 +M, this is not unreasonable in an equitable society provided the legstlation is structured so that it comes out of bank profits in the form of a tax on banks and not share holder dividends.

    • Muirfield Financial Services on May 11, 2017 at 12:07 pm

      Hi Mark, it will be interesting to see the further details of this levy.

  2. Geoff Lenton on May 11, 2017 at 11:54 am

    Thank you for the information Melinda.

  3. Pam Alsop on May 11, 2017 at 12:16 pm

    Thanks for the précis of the budget details Melinda. I am particularly interested in the home downsizing “carrot” as that is precisely what I am intending to do within the next 18 months. Pam Alsop

    • Muirfield Financial Services on May 12, 2017 at 12:09 pm

      Hi Pam – Thanks for your comment. Tamara will reach out to you to discuss these changes.

  4. Max & Allison Poyser on May 11, 2017 at 1:11 pm

    Is downsizing a ploy to change assets into cash to take pensions away from retirees who own a larger home? Will we be able to contribute to superannuation after 15 years of retirement drawing down our super ?

    • Muirfield Financial Services on May 12, 2017 at 12:23 pm

      HI Max and Allison – Thank you for the comment. Matt will reach out to you to discuss this.

  5. Julie Hehir on May 11, 2017 at 2:01 pm

    Wow??? Up to $30,000 from their super for 1st home buyers deposit ,but the Govt. will tax you on that, how much help will that really be?
    How about really helping them by cancelling stamp duty for first home buyers.
    Julie Hehir

    • Muirfield Financial Services on May 12, 2017 at 12:21 pm

      Hi Julie – yes, it will be interesting to see how this all turns out.

  6. Pete Roper on May 11, 2017 at 3:46 pm

    So, given I sell my house and afer buying a smaller house I put $300,000 into super, how does this then affect my pension? Say for instance I already have $400,000 in super that would then make $700,000 to be assessed and I would still be a householder.
    Hey, and the good news is that I am getting a little bit of the pension back that they took off me to ease my power bills!

    • Muirfield Financial Services on May 12, 2017 at 12:19 pm

      Hi Pete – Thanks for the comment. Melinda will reach out to you to discuss this.

  7. Revd Elaine Ryan on May 11, 2017 at 4:18 pm

    Thanks Melinda

  8. Peter Spear on May 11, 2017 at 5:04 pm

    Thanks Melinda. An elegant and useful summary.

  9. Judith Kennedy on May 11, 2017 at 7:04 pm

    Your interpretation of the budget details are appreciated thank you Melinda. Particularly pleased about the Pensioner Concession Card.

  10. Annette and Dennis Gillett on May 11, 2017 at 7:53 pm

    Thankyou Melinda, we don’t understand how the Medicare levy works and how it will affect us.

    • Muirfield Financial Services on May 12, 2017 at 12:18 pm

      Hi Annette & Dennis. Thank you for your comment. Matt will reach out to you regarding this.

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