While the Government has introduced significant revenue measures in its 2017-18 Budget, they have generally done so by fine tuning the existing tax system rather than opting for major tax reform. The exception is the introduction of a new bank levy that is expected to raise $6.2 billion over the next four years and will significantly impact the financial services sector. The Government’s measures reflect a positive domestic and global economic outlook with large spending proposals particularly in infrastructure.
Significant changes across the operating environments of a number of industries and businesses include:
- Major Bank Levy and Bank Tribunal – introduction of a 6 basis point levy on the liabilities of major banks and a new Tribunal for complaints.
- Infrastructure – Significantly increased spending on infrastructure including the development of the Western Sydney Airport and a major rail link between Melbourne and Brisbane.
- Housing Affordability – tax concessions for first home owners and concessions for Managed Investment Trusts investing in affordable housing.
- Small Business – Confirmation of the lower rate reduction and extension of the $20,000 tax depreciation measures.
- Medicare Levy – increase in the levy by 0.5% to fund the NDIS.
- Education – $18.6 billion to be spent on schools and faster repayment of university fees.
- Multi-nationals & Hybrid Securities – extension of multinational avoidance measures to other entities and new rules governing hybrids.
- Foreign Ownership of Real Property – new rules restricting investment, a higher 12.5% CGT withholding rate and the reintroduction of the 50% threshold for new developments.
All Budget 2017‑18 documents are available to download from the Treasury's Budget 2017 website.
For an in-depth analysis, please select an area of reform below:
- Corporate Tax
Compared to previous years, this year’s Federal Budget is light on regarding specific corporate tax announcements. The most significant change relates to the application of the OECD hybrid mismatch rules to regulatory capital. Many other changes are merely confirmations of previously announced changes.
The Expansion of the Multinational Anti-Avoidance Law is the most significant reform in the international space and is set to capture structures that were thought to fall outside the application of the MAAL regime.
- Funds and Superannuation
The Government has left superannuation alone with no significant changes, few surprises and an ad hoc range of measures. With the industry struggling to implement the changes from the 2016 budget and currently being the subject of a wide number of reviews and changes, it will welcome the light touch approach in the 2017 budget.
On the funds front, the big ticket item is an initiative allowing investors in Managed Investment Trusts (‘MITs’) to undertake affordable housing projects to access tax concessions.
The Government has announced significant infrastructure spending across Australia with the focus on roads and rail in cities and regional areas. The expansion of the use of debt and equity financing to fund infrastructure spending will establish the Infrastructure and Project Financing Agency to assess the Government’s financing options for major projects going forward
- Impact on Banks
The Budget included a number of strong measures directly aimed at Australian banks including the major banks levy, an open banking regime, increased financial system competition, a one stop shop for external dispute resolution and a banking executive accountability regime.
- Tax Compliance
The Government continues to broaden the tax integrity measures announced in the previous budget and target the black economy. In addition to the measures addressed elsewhere in this alert, the following measures form part of the overall tax integrity package.
- Small Business
The Government has extended some key existing concessions introduced in the 2016-17 Budget for Australian small businesses. By doing so, the Government is maintaining its position on easing the tax burden for small business.
- Personal Tax
Overall, minor changes to personal income taxation are set to be introduced. We will see several significant measures relating to residential real estate brought into play.
- Goods & Services Tax (GST)
The only surprise GST announcement in the Budget is the introduction from 1 July 2018 of a requirement for purchasers, rather than vendors to remit GST directly to the ATO on the sale of newly constructed residential premises.
If you have any questions about this year's Budget or would like to discuss how these measures will affect you, please contact us.