The winners and losers of the Federal Budget

Older Australians, First Home Buyers and Small Business are the clear winners from the Federal Budget, but the list of losers is long.  Treasurer Scott Morrison’s second budget may have been short and sweet but the bottom line is, taxpayers may all be paying more going forward.

If you didn’t get a chance to watch it live, here are the highlights.

THE WINNERS

Schools

With more than 18 billion extra dollars over 10 years, schools are the winners although not all schools will benefit, with around 300 who will receive less than expected.

NDIS

The National Disability Insurance Scheme will be fully funded with tops ups coming from an increase in Medicare Levy.

Older Australians

If you were affected by the changes to the Assets Test rules on 1 January and you lost your pensioner concession card, this benefit will now be reinstated.  You will also get a rebate on your power bill.

For those over the age of 65 who are looking to downsize their home, the Government will allow each individual to contribute $300,000 of house sale proceeds into super without having to meet the work test or age limit rules.

Any change in the person’s superannuation balance as a result of this measure will still count towards the Age Pension assets test. Restrictions on non-concessional contributions for people with balances above $1.6 million will not apply to contributions made under this new special downsizing cap.  Only people who have remaining transfer balance cap space will be able to convert their contributions into a pension phase account where earnings are tax-free.

Health

There will be a reduction in the price of certain pharmaceuticals with out-of-pocket expenses for certain medicines to be reduced with additional medicines being added to the Pharmaceutical Benefits Scheme.

Patients’ out-of-pocket expenses should be lower, with the Government lifting the freeze on Medicare rebates over the next three years, improving the incentives for GPs to bulk bill.

Farmers

Farmers will benefit from an inland rail network to move their goods quickly and cheaply between Brisbane and Melbourne.

Small Business

Instant tax write offs stay for another year to help improve cash flow with businesses that turn over less than $10 million each year, to immediately write off expenditure up to $20,000.

However, some small businesses may also be hit with a new foreign worker levy.

First Home Buyers

It’s a win for first home buyers who will be able to contribute to their superannuation to save for a house deposit in a similar way to salary sacrifice.

From 1 July 2017, individuals can make voluntary contributions of up to $15,000 per year and $30,000 in total.  These contributions, which are taxed at 15 per cent, along with deemed earnings, can be withdrawn for a deposit. Withdrawals will be taxed at marginal tax rates less a 30 per cent offset and allowed from 1 July 2018.

Child Care

From 2 July 2018, the single, simplified, means-tested Child Care Subsidy will replace the Child Care Benefit, Child Care Rebate and Jobs, Education and Training Child Care Fee Assistance Programme.

The Child Care Subsidy will ensure families on low to middle incomes of $185,710 or less (in 2017-18 terms) who need to use more child care will not face an annual cap. An annual cap of $10,000 will apply to families earning more than $185,710 (in 2017-18 terms).

THE LOSERS

Tax payers

Most taxpayers will soon be paying more tax with the Medicare Levy increasing 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) and avoid future budget black holes.  This is due to start on July 1, 2019.

Banks

The big five banks will bear a share of fixing the deficit with a 0.06 per cent levy starting on 1 July.  Costs could be passed on to customers which may make smaller competitors more attractive.

Uni Students

University fees will rise with students paying an extra $2,000 to $3,600 for a four-year course.  The income level at which you must start repaying your HECS debt will also be reduced from $55,000 to $42,000.

Foreigners

Foreign investors are being penalised with an extra charge for properties left vacant and will pay capital gains tax on their personal home.

Non-Vaccinators

Parents who don’t vaccinate their children will lose about $28 per child per fortnight in Family Tax Benefit, with the Government withholding about $66 million worth of payments.

Welfare Recipients

Some welfare recipients will be subject to random drug testing with jobseekers who test positive to drugs, to have their payments quarantined.

Rental Property Owners

From 1 July 2017, the Government will improve the integrity of negative gearing by disallowing deductions for travel expenses and, for properties bought after today, the Government will also limit plant and equipment depreciation deductions to only those expenses directly incurred by investors.

However, from 1 January 2018, the Government will provide an additional 10 per cent CGT discount (60%) to resident individuals investing in qualifying affordable housing.  To qualify for the additional discount, housing must be provided at below market rent and made available for eligible tenants on low to moderate incomes. Tenant eligibility will be based on household income thresholds and household composition.

This list of winners and losers list was compiled on the night of the budget.  For the morning after commentary, please click here.

Why not increase the financial savviness of those around you – pay it forward and pass on these tips to your family, friends and kids.  

Olivia Maragna is the co-founder of Aspire Retire Financial Services and is a respected and independent financial expert.  Olivia’s advice is general in nature and readers should seek their own professional advice before making any financial decisions.

You can follow Olivia on Facebook or Twitter at https://twitter.com/oliviamaragna