On 9th May 2017 Treasurer, Scott Morrison, released the Government’s 2017/18 Budget.

Morrison delivered what he described as a ‘fairness’ budget and after years of belt tightening saw a major shift in emphasis to big spending and big taxing resetting the economy amid positive global economic conditions.

The main aspects of budget 2017 focused on 5 key areas – health, education, infrastructure, housing affordability and banking. The government is still aiming to return to surplus in 20210-21.

We provide an overview of the broader budget impacts and measures below noting that before any announcements can be implemented, they require passage of legislation and may be subject to change.

Most taxpayers will be paying more tax

The Medicare Levy is set to increase by 0.5 per cent – from 2 to 2.5 per cent of taxable income – to help fund the $22 billion National Disability Insurance Scheme (NDIS). If it’s passed by Parliament, the change will kick in on July 1, 2019.

The big banks won’t be happy

With liabilities of more than $100 billion the Commonwealth Bank, Westpac, National Australia Bank, ANZ and Macquarie are essentially getting taxed a .006% levy that will kick in on July 1 – boosting the budget bottom line by $6.2 billion over the forward estimates. They are also facing new scrutniy on executive behaviour and bonuses – with APRA given powers to remove and disqualify bank executives, new rules on providing credit cards and a new authority to help consumers with complaints will be established – the Australian Financial Compliants Authority.

Housing affordability measures

A plan has been put forward aimed at reducing pressure on housing affordability.

On the supply side the focus is on funding, land releases, superannuation incentives for down sizes and measures and incentives to encourage more affordable rental housing.

On the demand side the focus is on first home buyers and tougher rules on foreign ownership and investors.

Specific details include;

The ‘First Home Super Saver Scheme’ means first home buyers will be able to take advantage of the superannuation tax environment and accelerate their deposit savings. They will be able to make voluntary contributions to their superannuation to save for a house deposit with contributions taxed at 15% and withdrawals taxed at their marginal rate less 30%. The amount they can contribute is capped at $15,000 a year and $30,000 all up. Both members of a couple can take advantage of the scheme.

In addition to encourage down sizing and to free up supply, from 1 July 2018, individuals aged 65 will be able to make a non-concessional contribution of up to $300,000 of the proceeds from the sale of a principal residence held for at least 10 years.

New restrictions on foreign property owners are aimed at taking some heat out of property prices. This includes foreign investors being slugged an extra charge of up to $5,000 annually for properties left vacant, foreign property owners no longer being able to claim the main residence Capital Gains Tax exemption and will have to pay the Capital Gains Tax when they sell their main residence, and foreign ownership of new developments will be capped at 50 per cent.

Small Business

Small businesses owners will enjoy the instant tax offsets for another year. Small businesses with a turnover of up to $10 million/ annum will be able to immediately write off expenditure up to $20,000 until June 2018.

Additionally the government intends to cut red tape for small businesses by providing $300 million over 2 years to states and territories.

Further the government said it will be a requirement that companies pay a levy if they sponsor migrant workers. This will be put towards a ‘skilling Australia fund’. Additionally employees on a temporary work visa will cost a business up to $1,800 each year, and businesses will pay a one-off levy of $3,000 or $5,000 for workers on a permanent skilled visa.

Infrastructure

The Federal Government will pour $5.3 billion over the next four years into the second airport at Badgerys Creek and invest more than $8 billion to build an inland rail network linking Brisbane to Melbourne. Construction could start this year.

Western Australia will get new roads and rail, as part of a state-commonwealth funding package to be used on the Metronet rail project and upgrades to roads around the state.

Other budget measures

Education

• The Federal Government will give schools an extra $18.6 billion over 10 years, and standardise school funding.
• University students will have to pay an extra $2,000 – $3,600 for a four-year course – an increase of 1.8 per cent next year, and 7.5 per cent by 2022. The income level at which students will have to start repaying HECS debt will be reduced. Australian permanent residents and most New Zealand citizens will no longer be able to apply for Commonwealth supported university places.
• To fund the training of Australian apprentices and trainee’s employers will have to pay a levy of up to $5,000 for each foreign worker they employ.

Health

• The Government has struck a deal with Medicines Australia to reduce the price of certain pharmaceuticals and extra medicines to treat heart conditions and schizophrenia have been added to the Pharmaceutical Benefits Scheme.
• Patients’ out-of-pocket expenses should be lower, with the Government lifting the freeze on Medicare rebates and improving the incentives for GPs to bulk bill.
• Parents who don’t vaccinate their children will lose about $28 per child per fortnight.

Other

• Defence will get $34.6 billion in 2017-18 and Operation Sovereign Borders will continue to get the funding it needs to “stop the boats”.
• Aimed at levelling the playing field with Facebook, Netflix and Google free-to-air networks will save about $90 million a year through their annual license fee being abolished and replaced with a smaller yearly payment. The package also bans gambling advertising during live sport broadcasts.
• The Government has allocated $1 billion over five years for ongoing funding for the Landcare program.
• The asset tested pensioner concession benefits will be restored to previous levels.
• Older Australians will get a one-off $75 power rebate.
• Aiming at saving $632 million over 5 years the treatment of some welfare payments are being consolidated and jobseekers who test positive to drugs will have their payments quarantined under a demerit points system. Jobseekers aged up to 49 will now have to undertake 50 hours of approved activity a fortnight.
• Designed to give Australians  a ‘simpler and more accessible’ way to deal with disputes with banks, super funds and other financial institutiona see the creation of a new external dispute resolution body. The Australian Financial Complaints Authority (AFCA) is intended to improve competition and accountability among financial institutions.
• Changes have been slated to increase competition in Australia’s fintech sector. Aiming to make is easier for small businesses to raise capital and to test a wider range of financial products without a licence.

Anthony Landahl is the founder of Equilibria Finance