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Federal Budget 2017 - positives and negatives

05 June 2017

positives and negatives

The Federal Budget comes down and EoFY (End of Financial Year) follows around eight weeks later. For SME (Small Medium Enterprises) owners you might want to think about the immediate depreciation claim for small businesses, which was due to finish on 30 June 2017 but has been extended for another year to 30 June 2018.

The other thing to note is that up to 30 June 2016 small business was defined by turnover of less than $2m. After 1 July 2016 (so in the 2016/2017 financial year) that threshold has been lifted to $10m.

Therefore, all business with turnover under $10m will be able to access the accelerated depreciation on assets that cost less than $20,000, ex GST, and are installed ready to go before 30 June 2018.

What happens if your cash flow won’t support taking advantage of the initiative? A business loan might be your answer, but you need to talk to a finance and/or tax expert to see how a business loan would work.

If you’re considering the new first home buyer super saver scheme, finance experts have some concerns they want people to keep in mind.

How will the scheme operate in the real world? For example, how quickly could you access the funds for your deposit? And, how will your super fund “honour deemed earnings”? Super funds, as we know from media coverage, don’t always generate the same returns, so if the rate is less than that set by the first home savers’ scheme, how will that affect you and your savings plan?

If you buy at auction, a personal cheque for the deposit is required the same day. If it’s a sale process, you have to supply the deposit to exchange contracts. In other words, you’re going to need quick access to cash. Can the scheme do this?

You also need to work out how much can be saved using the scheme? Using just the scheme isn’t going to be enough if you’re looking at buying a property in a major Australian city. For example: a 10 percent deposit on say a $500,000 purchase is $50,000.

What if there are two of you using the scheme to save? That could work, but is your ‘other’ a first home buyer as well? If not, well no one knows what that means, yet.

Finally, check with your tax agent if you meet all the criteria for the scheme because, if you don’t, your contributions could be locked away until you retire.

Always speak with a financial expert about what you are thinking of doing. All saving is a positive step and savings do grow, so taking advantage of the scheme makes sense as part of a multi-pronged strategy. The scheme also puts the focus on super and that’s an important thing to think about, no matter your age.

This year’s Federal Budget included other measures that may be of use to individuals and businesses and we recommend having a look at “the document that helps shape the economy”. For more, listen to Chief Economist St George Bank Besa Deda on the Budget on our Ruby Expert webinar, hosted by the Davidson Institute.

The articles represent the views of the authors and not necessarily that of the Bank.You should seek independent professional advice before acting on any matters set out in the articles.