The end of financial year (EOFY) is almost upon us. For many, this means a nice little return on the taxes you paid over the previous year. Unfortunately, it also means a slew of approved Federal taxes will be taking affect from July 1 2017. Here are the tax changes, policy tweaks and new levies that will be affecting your wallet from next month -- for better and worse.
A new financial year means new taxes. Here are the main changes that normal, everyday Australians need to be aware of for the 2017-2018 financial year.
From July 1 2017, the Federal Government will apply the Goods and Services Tax (GST) to all digital products and services supplied into Australia. The tax will be imposed on all "intangible supplies", which includes digital content, games and software as well as consultancy and professional services performed offshore for customers in Australia. (Business-to-business transactions will be exempt, however.)
According to the government, the tax will remove the disadvantage faced by local, GST-paying businesses that need to compete with overseas companies who do not pay the tax. "This will maintain the integrity of the tax system and offer a level playing field for domestic suppliers," the government said in a statement.
GST will be imposed at a rate of 10 per cent on the value of the supply. (This means that a 12-month subscription to Netflix's entry level tier could potentially jump from $107.99 to $118.60 - a difference of around $10.70 per year.) Not all digital suppliers will pass the cost onto customers, but some undoubtedly will. We advise paying close attention to the next few billing cycles for any digital products or services you subscribe to.
In case you were wondering, the similar Online Goods Tax on all overseas purchases under $1000 has been postponed until 2018:
We have some good news and bad news for online shoppers. First, the good news. A proposed GST amendment - which will see GST extended to all goods bought overseas - has been delayed for another year.
Now for the bad news. It will almost certainly come into effect on July 1 2018, and the similar 'Netflix tax' kicks in at the end of this month. Better start stocking up on those streaming subscriptions and overseas goodies while the going's good.
Reduced penalty rates
From July 1 2017, penalty rates will be reduced for hospitality and retail staff around the country. According to the Fair Work Commission, the cuts will lead to increased services and trading hours on public holidays and Sundays.
While the biggest cuts to weekend penalty rates have been delayed until at least 2019, approximately 700,000 Australian workers will still be worse off from next month.
Single Income Family Supplement axed
The Single Income Family Supplement closes to new customers from 1 July 2017. Existing recipients will continue to receive payments until no longer eligible. You can’t reapply if there's a break in eligibility after 1 July 2017.
Changes to higher education and training loans
The minimum repayment threshold for higher education and training loans will be lowered to $42,000 with a one per cent repayment rate. This is down from the current minimum repayment threshold of $55,000 per year. On the plus side, this won't kick in until July 1 2018.
Major Bank Levy
From July 1, the government will be charging the big five Australian banks a new major levy. Before you cheer, it remains to be seen if this effective tax burden will be passed onto Aussie families.
Increased tax on roll-your-own tobacco products
Taxes are set to increase for roll your own (RYO) tobacco and other products such as cigars to align with manufactured cigarettes. The adjustment will be phased in over four years to align with the previously legislated 12.5 per cent tobacco tax increases which occur on 1 September each year.
Investment property changes
From July 1 2017, property investors will no longer be able to claim depreciation on assets within an existing property or travel expenses related to inspections, maintenance and collecting rent. Some believe these new limits on property investors could restrict housing supply -- and hurt housing affordability.
Steeper electricity bills
This one isn't a tax, per se, but it is linked to changes in government and corporate policy. Continuing issues with Australia's electricity network will see energy bills rise significantly from July 1. (For example, EnergyAustralia and AGL have flagged electricity price hikes in Sydney of 19.9 per cent and 16.1 per cent, respectively.) This trend is expected to worsen in the short-term as the country moves towards a clean energy target, as outlined in last month's Finkel review.
It's not all doom and gloom though. Here are some tax changes that are set to benefit ordinary Australians:
Increase to minimum wage
From July 1 2017, workers on the minimum wage will receive a 3.3 per cent pay rise (all states and territories, except for Western Australia). This works out to an additional $22.20 per week, or $1154 over the year for full-time workers. In WA, all state award rates will increase by 2.3 per cent.
First Home Super Saver Scheme
From July 1 2017, first home buyers will be able to make pre-tax contributions to their superannuation accounts to help them save for a house deposit. The scheme allows a total voluntary contribution of $30,000 (per person if in a couple). This amount can then be withdrawn to purchase a property.
Tougher taxes for foreign investors
From July 1, the foreign resident capital gains tax (CGT) will increase from 10 per cent to 12.5 per cent and now kick in at $750,000 (down from $2 million). Further, new foreign investors who leave a purchased property unoccupied for six months or more will be charged roughly the equivalent of their Foreign Investment Review Board fee.
Removal of "double taxation" on digital currency
From 1 July 2017, the government will align the GST treatment of digital currency (such as Bitcoin) with money. This means you will no longer be "double taxed": once on the purchase of the digital currency and again on its use in exchange for other goods and services subject to GST.
$20,000 instant asset write-off
The $20,000 instant asset write-off for equipment expenses has been extended to the 2017-18 financial year. If you're running a business with an annual turnover of less than $10 million, you can claim individual expenses of up to $20,000 worth of depreciating assets in each single instant write-off each financial year.
Tax cuts to small-to-medium business
The company tax rate will drop from 30 per cent to 27.5 per cent for businesses with up to $25 million in annual turnover.
This year, the biggest tax news for small businesses was the extension of the $20,000 write-off, up from $1000 in previous years. In addition, the company tax rate for small businesses has decreased and more businesses are now eligible for most small business tax concessions. We take a look at all of these changes and more.
Changes to Age Pension
From July 1 2017, the income test and assets test will increase slightly to stay in line with CPI increases. This means eligible Australians can own more assets and still be eligible for a full or part Age Pension.