2017-2018 Federal Budget Expert Analysis - Private Clients

Key points

  • Medicare levy to increase by 0.5% from 1 July 2019

  • Investment property related plant and equipment deductions to be limited

  • Investment property travel deductions to be disallowed

  • HELP repayment thresholds to change from 1 July 2018

  • 2% budget deficit levy to end on 30 June 2017

The Medicare levy is to increase by 0.5% (from 2% to 2.5%) from 1 July 2019 to ensure the National Disability Insurance Scheme is fully funded. The current Medicare Levy rules, including exemptions remain unchanged.

For property investors, from 1 July 2017 plant and equipment depreciation deductions will be limited to expenses actually incurred by investors. Plant and equipment forming part of current investment properties will be grandfathered, including contracts for investment properties already entered into at 7:30PM (AEST) on 9 May 2017. Investors who purchase plant and equipment for their residential property after 9 May 2017 will continue to be able to claim depreciation deductions over the asset’s useful life, however subsequent owners will no longer be able to.

From 1 July 2017 travel deductions relating to investment properties will be disallowed.

The Government has announced changes to the Higher Education Loan Program (HELP) repayment thresholds from 1 July 2018. A new minimum threshold of $42,000 has been introduced commencing with a 1% repayment rate, and a maximum threshold set at $119,882 with a 10% repayment rate.

The Government has confirmed that the temporary 2% budget deficit levy on incomes over $180,000 will not be extended beyond the initial 3 years. The levy will end on 30 June 2017.