Archive for the '2016-17 Budget' Category

Budget 2017/18: salary packaging to help first home buyers

Budget 2017-18_social

Treasurer Scott Morrison delivered his second federal budget on Tuesday 9 May, including a key measure aimed at tackling housing affordability for first home buyers.

From 1 July 2017, first home buyers will be allowed to make salary-sacrifice contributions to their superannuation fund that, along with the related earnings, can be withdrawn for a first home deposit. Significantly, both members of a couple can take advantage of this measure and combine savings for a single deposit to buy their first home together.

As part of the proposal, salary-sacrifice contributions will be taxed as per current super contributions and withdrawals taxed at the marginal rate, less 30% offset.

Combined with the existing concessional tax treatment of contributions and earnings, this may reduce the time it takes for first home buyers to save a deposit.

Other key points to note:

  • Contributions will be capped at $30,000 per person, and $15,000 a year (within the existing $25,000 concessional super cap)
  • Contributions can be made from 1 July 2017, and withdrawals from 1 July 2018.

Changes to the Medicare Levy

Another notable change that will impact salary packaging is the proposed increase in the Medicare Levy from 2% to 2.5% to ensure the full funding of the National Disability Insurance Scheme (NDIS).  Effective 1 April 2019, this is likely to lead to an increase in the FBT rate, expected to apply from 1 April 2020. For PBI employers, this may also impact the $17,000/$30,000 tax-free caps and the $5,000 Meal Entertainment cap.

Changes to HECs debt repayment

Also influencing salary packaging is a proposal that will see the income level at which HECS debt repayments commence reduced from $55,000 (including reportable fringe benefits and salary packaged superannuation) to $42,000, effective 1 July 2019.

We will be in touch with our valued customers to ensure that they understand the changes and how they may be affected by them.

2016/17 Budget: changes to super contributions the largest impact for salary packaging customers

By David Lilja, Group Remuneration Services Manager, Smartgroup

David LiljaThe Australian Federal Budget was handed down on Tuesday, May 3; the first for the Turnbull-led Coalition Government, and on the eve of the much-anticipated 2 July election announcement.

From a salary packaging point of view, the budget does not offer any significant changes or challenges. Unlike budgets from previous years, salary packaging rules were left relatively untouched so all current salary packaging items will remain available.

The only notable impact on salary packaging is the proposed reduction to annual concessional (pre-tax) superannuation contribution caps. These caps are currently set at $30,000 per year for those aged 49 or under as at 30 June 2016 and $35,000 for those aged 50 or over as at 30 June 2016. From 1 July 2017, the government proposes to replace these with a single cap of $25,000 per year and remove the age restriction so that it applies to everyone. You should note that your employer’s Super Guarantee contributions count towards this cap.

The knock-on effect will be a decrease in the amount employees can contribute to super from pre-tax income.

A further proposal which impacts higher income earners is the reduction of the threshold for the 30% superannuation contribution tax from $300,000 to $250,000, effective 1 July 2017. Currently, those with an adjusted taxable income of less than $300,000 have a 15% superannuation contribution tax.

The Government also affirmed its decision to remove the 2% Budget Repair Levy from 1 July 2017, which will benefit those with an adjusted taxable income greater than $180,000. As a result, there will be an impact on Fringe Benefits Tax (FBT) and, by default, salary packaging.

Currently, the Budget Repair Levy is factored and included in the FBT Type 1 and Type 2 gross-up rates, as well as the FBT rate. From 1 April 2017, these rates will be reduced to reflect the removal of the levy.

While this will have no effect on the $9,010 and $15,900 cap benefit thresholds currently received by PBI and hospital employees, it will have a positive impact on the combined meal/accommodation cap introduced earlier this year, increasing the net benefit value from $2,550 to $2,650. Details will be communicated to affected customers closer to implementation, which is expected to be 1 April 2017.

The positive news continues with changes announced to the 32.5% marginal tax rate which is geared to benefit “average Australians.” The income tax threshold margin will rise from $80,001 to $87,000, and Opposition leader, Bill Shorten had indicated Labor will not oppose this change, which is set to take effect on 1 July 2016.

Overall the budget has not been detrimental to Australian salary packaging arrangements, nor has it required any significant change to packaging systems or procedures.

This means that Smartsalary will continue to focus on the delivery of simple, safe and valuable benefits without disruption for the foreseeable future.


Deven Billimoria
Chief Executive Officer
Smartgroup

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