It’s the annual event that is strangely big on hype, given how awfully boring it really is. Sometimes I think there are too many journalists in Canberra, leading to a lot of noise about nothing much.
In my view, Canberra should be boring. And this budget has delivered on my expectations, in that there is not a lot of changes in personal finance for the majority of people.
The theme of this year’s budget seems to be “let’s not rip anyone off this time” and there is not much outside of a few tweaks in the rules around personal finances.
So here’s the highlights about this budget, and what to expect in the changeover from the 2017 to 2017 financial years.
Tax rate changes:
No new changes have been announced for next year, but already scheduled was a couple changes so small that no one will notice. There’s an increase in one threshold from $80,000 to $87,000 and the top rate is now 2% lower at 45% (plus medicare) with the expiry of the “temporary budget repair levy” (one of Abbot’s tax increases after promising no tax increases).
Then there’s some changes for 2019, but again they are so small that no-one will notice. The medicare levy increases by 0.5% to 2.5% and the top tax rate increases by 0.5% to 47.5%.
Property related changes:
First Home buyers can use voluntary super contributions made after 1 July 2017 towards their first home purchase. Nice! So if you’re clever, you can reduce the amount of tax you pay by sacrificing money into super, then withdraw it to buy your first home. I like two things about this: the reward for the discipline of saving, and the encouragement for people in their 20’s and 30’s to think about their super. This can’t be taken advantage of in a hurry, like the old first home-owners grant, it rewards those who plan ahead and are smart with their savings.
People over age 65 who downsize their long-term home can contribute up to $300,000 per person to super, from 1 July 2018. I think this measure is full of perceived benefit, without actually making much financial difference to many people. Some people might get a little benefit, but I like this because it will give some people an additional reason to downsize, bringing some property supply onto the market.
Property Investors can’t claim tax deductible travel expenses to inspect their investment property, so this means no more taxpayer funded travel junkets. That seems fair to me, and this probably only hurts Gold Coast property developers who might need to reprint their marketing material.
Property investors in “qualifying housing” will receive an extra Capital Gains Tax discount, of 50% to 60%. I won’t be recommending this strategy to any clients, because chasing the small tax benefit could distract from selecting a good investment.
Social Security changes:
Family Tax Benefit tweaks - I don’t think any family understands how to calculate their benefit, so explaining the tweaks here is counterproductive. Put simply, there’s no CPI increase in payments until July 2019, and families with income above $94,316 might see a reduction in their benefit with a new taper calculation.
Lastly, an obligatory vote buying cash splash to those on an Age pensioners, Disability pension, Veteran’s Affairs pension or Single Parents, with $125 for a couple or $75 for a single. It’s called an “Energy Assistance Payment”.
And that's it!
Like I said, it doesn’t annoy anyone too much and is mostly pretty boring - just what we want in a budget!