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The 2017 Budget For Medical Professionals

In this article I want to highlight how some of the proposed Budget changes affect medical professionals’ personal and business finances in particular.

1) First Home Super Saver Scheme – an opportunity for young doctors to save for their first home in a more tax-effective way

Proposed effective date: 1 July 2017

From 1 July 2017, individuals will be able to make voluntary super contributions (e.g. salary sacrifice and non-concessional contributions) of up to $15,000 per annum and $30,000 in total, to their super account to purchase a first home. These limits apply to each individual, which means a couple can contribute up to $30,000 per annum and $60,000 in total. Voluntary contributions under this scheme must be made within the existing super contribution limits ($25,000 for concessional and $100,000 for non-concessional). Withdrawals of the contributed amounts along with the deemed earnings will be allowed from 1 July 2018. The amount of earnings that can be released will be calculated using a deemed rate of return based on the 90-day Bank Bill rate plus three percentage points (currently this equates to 4.78%).

The withdrawals of concessional contributions and associated earnings will be taxed at the individual’s marginal tax rate, less a 30% tax offset. When non-concessional amounts are withdrawn, they will not be taxed, but the earnings will most likely be taxed at the individual’s marginal tax rate, less a 30% tax offset.

2) Contributing the proceeds of property down-sizing to super – an opportunity for doctors in/nearing retirement to contribute more funds to super

Proposed effective date: 1 July 2018

The government proposes that from 1 July 2018, people aged 65 and over will be able to make a non-concessional contribution to their super of up to $300,000 from the proceeds of selling their home, irrespective of their age, work status or total super balance. Both members of a couple will be able to take advantage of this measure for the same home, meaning $600,000 per couple can be contributed to super. To be eligible, the property must be a principal place of residence owned for a minimum of 10 years. These contributions will be in addition to any other concessional or non-concessional contributions you are eligible to make.

3) Marginal tax rates remain unchanged – a 2% tax deduction for most doctors

Effective date: 1 July 2017

Marginal tax rates are unchanged from 2016–17. As legislated, the Temporary Budget Repair Levy – which is an additional 2% on the top marginal tax rate – will expire on 30 June 2017, reducing the top tax rate (incl Medicare) to 47% from 49%.

4) Increase to Medicare levy – affecting most taxpayers

Proposed effective date: 1 July 2019

The Medicare levy is proposed to increase from 2% to 2.5% from 1 July 2019. The increase in the Medicare levy will be used to fund the National Disability Insurance Scheme (NDIS).

Other tax rates that are linked to the top marginal tax rate (i.e. 47.5% following the increase) will also increase, such as the fringe benefits tax rate.

5) Residential investment property – disallowance of deduction for travel expenses and limitation on deductible depreciation – less negative gearing deductions for doctors

From 1 July 2017, travel expenses incurred in inspecting, maintaining or collecting rent on your residential investment properties will no longer be tax deductible.

In a separate proposal, depreciation deductions for plant and equipment – such as dishwashers and ceiling fans – in residential investment properties will be limited to the actual expenditure you incur.

6) Instant asset tax write-off extension – potential tax deductions for doctors in private practice

Proposed effective date: 1 July 2017

The government has announced a further extension until 30 June 2018 of the accelerated depreciation rules. This will allow businesses with annual aggregated turnover of less than $10 million to immediately deduct purchases of eligible assets costing less than $20,000 where first used, or installed ready for use, by 30 June 2018.

7) Child care rebate changes to affect young doctor families

A single, means-tested child care subsidy will replace previous child care benefits and rebates. Families earning $185,710 or less and who need to use more child care will no longer face an annual cap. Those who earn more than $185,710 will have their child care rebates capped at $10,000. Parents of pre-school-aged children will keep their guaranteed 15 hours a week of free access. Wealthy families will have their child care subsidies cut off once they earn a combined $350,000 a year, in a move that will affect young doctors with families.

All in all this was a very ‘low-key’ Budget, which was to be expected after the sweeping changes announced in last year’s Budget. Please feel free to contact us for any questions on 08 6160 5918 or Yves@affluenceprivate.com.au


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