Government’s Not So Happy New Year: Legislation Hangovers with 2017 proposed tax changes in limbo
- 11 January 2018
Government’s Not So Happy New Year: Legislation Hangovers
Personal
The Bill that proposes to increase the Medicare levy rate from 2% to 2.5% of taxable income for the 2019 – 2020 and later income years is still before the Senate. Labor Senators have recommended the rate of 2.5% should only apply to individuals with incomes above $87,000. In addition, they would also like to reinstate the Budget Repair Levy of 2% on taxable incomes in excess of $180,000 which ended on 1 July 2017. Labor has indicated that they will vote against the proposed increase in the Medicare levy rate if they don’t get the changes they want. The Government seems unlikely to agree to the changes to the Budget Repair Levy requested by Labor, which all points to a difficult passage for the Bill unless the Government can do a deal with the minor parties and/or independents.
Business
The Bill that seeks to progressively lower the company tax rate is still before the House of Representatives. In its current form, the Bill proposes to extend the 27.5% company tax rate to all corporate tax entities by 2023 – 2024, at which point, the tax rate would be progressively cut to 25% by 2026 – 2027. An associated Bill to ensure that a company will not qualify for the lower company tax rate if more than 80% of its assessable income is passive income (i.e. interest, dividends, or rent) is also before the House of Representatives.
Businesses will need to satisfy a passive income test to access the 27.5% corporate tax rate from 2017 – 2018.
For the 2016 – 2017 income year, a company only needed to be carrying on a business and have a turnover of under $10 million to qualify for the 27.5% corporate tax rate. If this Bill passes, small companies set up to invest in property and earn rent would no longer be able to access the lower corporate tax rate if that passive income is more than 80% of the company’s total income. A similar outcome would result for companies who invest in shares to generate dividend income.
Superannuation
The salary sacrifice contributions integrity Bill is still before the Senate. It proposes to prevent employers from using employees’ salary sacrifice contributions to reduce their own minimum 9.5% superannuation guarantee contributions from 1 July 2018. The Bill also extends the choice of superannuation funds to employees covered by new enterprise agreements and work determinations made on or after 1 July 2018.
Education
The Bill to reduce the Higher Education Loan Program (HELP) minimum repayment income thresholds is still before the Senate. The Bill lowers the minimum repayment threshold from $51,956 to $41,999 from 1 July 2018 with a 1% repayment rate. It also proposes to index the minimum repayment income threshold according to the Consumer Price Index.
Social security
Bills that implement major social security changes are at various stages before Parliament, including:
- the creation of a jobseeker payment to replace seven existing payments;
- cessation of the widow B pension;
- removing certain exemptions for drug or alcohol dependence;
- establishing a two year drug testing trial in three regions; and
- changes to residency requirements for the aged pension.
How might these changes affect me?
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.