At 7:30pm on 9 May 2017, Scott Morrison delivered his second budget with a forecast budget deficit of $29.4 Billion for 2017-18, $21.4 Billion for 2018-19, $2.5 Billion for 2019-20, and a surplus of $7.4 Billion for 2020-21.

The treasurer announced that we are moving towards the end of a difficult period and that this budget is about making the right choices to secure the better days ahead. This budget is based on fairness, security, and opportunity and the government’s aim is to return the budget to balance in 2021 and remain in surplus over the medium term.

Key Forecasts

• 2.75% economic growth is expected for 2017-18, 3% for 2018-19, and 3% for 2019-20 and 2020-21
• 4% nominal GDP is expected for 2017-18 and 2018-19, 4.5% for 2019-20, and 4.75% for 2020-21
• 2% inflation is forecast for 2017-18, 2.25% for 2018-19, and 2.5% for 2019-20 and 2020-21
• 5.75% unemployment is expected for the 2017-18 year, 5.5% for 2018-19 and 2019-20, and 5.25% for 2020-21

Key Change for Small Business

The treasurer announced that small business owners are out their fighting for growth in their businesses every day.

The key change announced in this budget for small business is that the immediate tax deduction for assets costing less than $20,000 will be extended for another year for businesses turning over less than $10m per year. This tax benefit was previously legislated to end on 30 June 2017.

Key Changes for Individuals

The key budget announcements that impact on individuals are:

• The Medicare Levy will increase by 0.5% to 2.5% from 1 July 2019 in order to close the funding gap on the National Disability Insurance Scheme;
• From 1 July 2017, a tax cut will apply for first home deposit savings by enabling individuals to salary sacrifice earnings into superannuation, in addition to their compulsory employer superannuation contributions, in order to save for a deposit for a first home. The contributions and earnings will be taxed in the fund at 15% and withdrawals will be taxed at the marginal tax rate less a 30% discount. The total contribution amount will be limited to $30,000 per person and each person cannot contribute more than $15,000 per year;
• Individuals aged over 65 who are downsizing their home that they have owned for at least 10 years, can contribute up to $300,000 of the sale proceeds as a non-concessional contribution into superannuation;
• Mum and dad investors will continue to be able to use negative gearing on investment properties;
• From 1 July 2017, the government will improve the integrity of negative gearing investments by disallowing tax deductions for travel expenses;
• In relation to investment properties purchased after 9 May 2017, plant and equipment depreciation deductions will be limited  to expenses incurred directly by the investors;
• The Capital Gains Tax discount will increase from 50% to 60% for investments in affordable housing.

Key Changes Relating to Foreign Investors

The government has chosen to put downward pressure on rising housing costs by implementing tougher rules for foreign investors in residential real estate. The following was announced:

• The main residence Capital Gains Tax exemption will be removed for foreign investors;
• A new annual foreign investment levy of at least $5,000 will apply to all future foreign investors who fail to occupy or lease their properties for at least 6 months of each year;
• Property developers will be limited to selling not more than 50% of units to foreign investors in developments containing more than 50 units.

Other Interesting Announcements

Some other interesting announcements tonight are:

• A new 6 basis points levy will apply to the big 5 banks on their liabilities from 1 July 2017. Mortgages, and deposits under $250,000 are excluded from this levy;
• An annual temporary worker visa levy of $1,200 to $1,800 per worker per year and a one-off permanent skilled visa levy of $3,000 to $5,000 will replace the current requirement for employer sponsors to spend 1% to 2% of employment costs on training.