Following the Budget 2017 announcement on 9 May 2017 by Federal Treasurer Scott Morrison, the Australian Childcare Alliance NSW has had a chance to review and share what it can mean for privately-owned childcare service providers and their families?

Major Bank Levy to generate up to $1.6b per year

Applicable only to Commonwealth Bank, National Australia Bank, Westpac, ANZ and Macquarie Bank, the levy (or tax) on banks’ liabilities will be at 0.06% on higher risk liabilities and not on people’s deposits below $250,000 or shareholders’ equity and retained earnings.

It is envisaged that the banks will either pass the added costs to customers by lowering the interest they give to depositors or by raising the interest rates they charge borrowers.

There is also a concern that this levy (or tax) would undermine property market.

Naturally, the biggest winners will likely be the smaller banks.

Extension of instant asset write-off rules

The Government will further extend the May 2015 Budget measure to allow an instant asset write-off for businesses. This has applied to businesses with an aggregated annual turnover of less than $10 million since 1 July 2016, now the May 2016 Budget announcement has passed the House of Representatives. Small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2018. Certain assets (such as horticultural plants and in-house software) are excluded.

It was also confirmed that, from 1 July 2018, the immediate deductibility threshold and the balance at which a small business depreciation pool can be immediately deducted will revert back to $1,000.

Small business CGT concessions

Integrity measures will be introduced into the small business Capital Gains Tax (CGT) concessions from 1 July 2017 to prevent it being applied to assets that are unrelated to the small business. The concession continues to be available to businesses with aggregated annual turnover of less than $2 million or business assets less than $6 million.

Tax integrity – foreign resident CGT rules

The Government has announced a technical change to the scope of taxable Australian property in Division 855 of the Income Tax Assessment Act 1997. Specifically, the principal asset test will be applied on an associate-inclusive basis which is designed to ensure that foreign residents cannot avoid a CGT liability by disaggregating indirect interests in Australian real property. The measure is stated to apply from 7.30 pm (AEST) on 9 May 2017 (this appears to indicate that the amendment will apply to disposals occurring after that date).

Tax on Temporary Overseas Employees

From March 2018, businesses that employ foreign workers on certain skilled visas will be required to pay a levy that will provide revenue for a new Skilling Australians Fund.

Businesses with turnover of less than $10 million per year will be required to make an upfront payment of $1,200 per visa per year for each employee on a Temporary Skill Shortage visa and make a one-off payment of $3,000 for each employee being sponsored for a permanent Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa.

The levy will replace the current training benchmark financial obligations for employers of workers on Temporary Work (Skilled) (subclass 457) visas, which are being abolished, and permanent Employer Nomination Scheme (subclass 186) Direct Entry stream visas.

New Temporary Sponsored Parent Visas

Interestingly, the Federal Government intends introducing a new Temporary Sponsored Parent Visas, thus allowing grandparents and relatives to stay in Australia for up to 5 years. Certain MPs have already linked this new visa as a social benefit through assistance in child minding as working-age parents can return to work while their parents mind the grandparents, which would also reduce pressure on childcare places.

The visas will be valid for a period of either 3 or 5 years, with the visa application charge for the 3 year visa being $5,000 and the charge for the 5 year visa being $10,000.

Conscientious objectors to vaccinations

Parents who do not vaccinate their children will lose about $28 per child per fortnight. This money will be withheld from their Family Tax Benefit Part A. The Federal Government anticipates $66 million worth of such savings.

Proceeds from downsizing into superannuation

From 1 July 2018, a person aged at least 65 will be able to make an additional non-concessional contribution of up to $300,000 ($600,000 for a couple) from the proceeds derived from the sale of their principal residence that has been owned for 10 years or more.

Outstanding Reforms to Watch For

Notwithstanding the announcements in this Budget thus far, it is anticipated that there will be more reforms to come, including:

• The final black economy recommendations that will be presented by the Taskforce in October 2017
• The House of Representatives committee recommendations on the deductibility of work-related expenses
• The implementation of the recent Senate recommendations to improve the non-payment of Superannuation Guarantee Charge (SGC)
• Finalising the long-awaited amendments to the tax consolidation rules
• Implementing the Taxation of Financial Arrangements (TOFA) simplification measures
• Legislating the Division 7A tax related changes to shareholders and shareholders’ associated announced in the May 2016 Budget

For any further information and clarifications, the Australian Childcare Alliance (ACA) NSW recommends that members contact their tax and financial advisors.