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On 9 May 2017, Scott Morrison handed down the 2017 Australian Federal Budget.  The Budget contained a number of new revenue raising measures including a proposed increase in the Medicare levy and a levy on the liabilities of large banks, balanced with tax incentives for small businesses and individuals.  The proposed new measures are outlined below.

Individuals

Increase in the Medicare Levy

The Federal Government has sought to fully fund the National Disability Insurance Scheme.  This scheme is to provide government support for those with significant disabilities under the age of 65.  The government proposed to increase the Medicare Levy from 2% to 2.5% commencing 1 July 2018 to fund this scheme.

First home owner Super Saver Scheme

The Federal Government proposes to introduce a new first home owner Super Saver Scheme by which individuals can save up to $15,000 (or $30,000 for a couple) in an account within their superannuation fund to fund a deposit for their first home.  They money deposited in one of these accounts will be concessionally taxed.

Contribution money to superannuation when downsizing the family home

Where an individual has owned their principal place of residence for at least 10 years, they will be able to sell their property and contribute up to $300,000 of the sale proceeds to their superannuation fund.  This contribution will not be counted as a concessional or a non-concessional contribution.

Reduction in depreciation deduction for on-sold investment properties

Investors will only be able to claim depreciation deductions on items of equipment (e.g. kitchen appliances, fit outs) where they make the actual outlay.  As such, the first purchaser of a property will be able to claim depreciation deductions on all the equipment in that property, but a subsequent owner will not.  A subsequent owner will only be able to claim depreciation deductions in respect of equipment they purchase and install.

Superannuation – limited resource borrowing arrangements

The Federal Government considers that there is abuse in relation to real estate purchased by a superannuation fund using limited recourse borrowing arrangements.

From 1 July 2017, the outstanding balance of a limited recourse borrowing arrangement must be included in a super member’s transfer balance cap.

From 1 July 2017, repayment of interest and principal of a limited recourse borrowing arrangement in an accumulation account will be a credit in a member’s pension transfer balance cap account.