The 2017 Budget delivered something of a mixed back for individuals and families.
Date of effect 1 July 2019
The Medicare Levy will increase to 2.5% of taxable income (up from 2%) from 1 July 2019, raising an estimated $8.9 billion in its first three years.
Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased.
Low-income earners will continue to receive relief from the Medicare levy through the low-income thresholds for singles, families, seniors and pensioners. The current exemptions from the Medicare levy will also remain in place.
The measure is to inject funds into a savings fund for the National Disability Insurance Scheme.
Date of effect 2016-17 income year
The Medicare levy low-income thresholds for singles, families and seniors and pensioners will increase to take account of movements in the CPI:
Date of effect From 2018-19 income years
The Child Care Subsidy will be limited to families with incomes below $350,000 per annum. This upper-income threshold will be indexed annually from 1 July 2018.
Date of effect 1 July 2017
The Family Tax Benefit payment rates will remain static for the next two years until indexation resumes on 1 July 2019.
Date of effect 1 July 2018
A consistent 30 cents in the dollar income test taper for Family Tax Benefit Part A families with a household income in excess of the Higher Income Free Area (currently $94,316) will apply from 1 July 2018.
In addition, the increase to the Family Tax Benefit A announced as part of the 2015-16 Mid-Year Economic review will not proceed.
Date of effect 1 July 2018
The residency requirements will be strengthened for access to the Age Pension and the Disability Support Pension.
Claimants will be required to have 15 years of continuous Australian residence before being eligible to receive the Age Pension or DSP unless they have either:
- 10 years continuous Australian residence, with five years of this residence being during their working life (16 years of age to Age Pension age); or
- 10 years continuous Australian residence, without having received an activity tested income support payment for a cumulative period of five years.
Existing exemptions for DSP applicants who acquire their disability in Australia will continue to apply.
A new demerit system will be introduced to tackle deliberately non-compliant job seekers.
Each failure without a reasonable excuse will result in payment suspension until re-engagement and accrual of demerit points.
Individuals who accrue four demerits in six months will enter a three-strike Intensive Compliance Phase, in which they will face escalating penalties, for example:
- Loss of 50% of their fortnightly payment for their first strike without a reasonable excuse;
- Loss of 100% of their fortnightly payment for their second strike; and
- Payments will be for four weeks for their third strike.
A new Jobseeker payment will transition and replace seven working age payments and allowances - Newstart Allowance, Sickness Allowance, Widow Allowance, Partner Allowance, Widow B pension, Wife Pension, and Bereavement Allowance.
In addition, the Government intends to introduce new participation requirements.
Date of effect From 2017-18
$24 million over four years has been set aside to establish a Rural and Regional Enterprise Scholarships program. At least 1,200 Rural and Regional Enterprise Scholarships of up to $20,000 each will be available for students undertaking undergraduate, post-graduate or vocational education and training qualifications in priority fields of study including science, technology, engineering, mathematics, and health.
Higher education fees increased
Student contributions to the Higher Education Loan Program will increase by 7.5% over 4 years from 1 January 2018.
In addition, the threshold at which students start to pay back student loans will be reduced from 1 July 2018. A new minimum threshold of $42,000 will be established with a 1% repayment rate and a maximum threshold of $119,882 with a 10% repayment rate.
Changes are also being made to the Commonwealth Grants Scheme with an efficiency dividend of 2.5% introduced in 2018 and 2019. Additionally, access to the CGS will end for permanent residents and to most New Zealand residents – these students will be able to access concessional loans instead. The changes apply to students enrolled from 1 January 2018.
Funding for schools
The Government is introducing a "needs-based" funding model for schools. Recurrent funding will be based on a needs-based Schooling Resource Standard of 20% for Government schools and 80% for non-Government schools.
The standard provides a base amount of $10,953 in 2018 for every primary school student and $13,764 for secondary school students, plus loadings for students and schools that need extra support.
Budget repair Levy ends on 30 June 2017
The 2% budget repair levy is due to expire on 30 June 2017. The budget repair levy is imposed on taxpayers whose income exceeds $180,000 per annum and is imposed on the excess over that threshold.
More from Budget 2017
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.