2017 proved to be a very big year in many different ways. On 20 January, Donald Trump became the 45th President of the United States of America and commenced his campaign to ‘Make America Great Again’. On 29 March, Article 50 of the Lisbon Treaty was invoked, initiating BREXIT, Britain’s official divorce from the European Union.
From an investment perspective, we saw the global stock markets increase by US$9 Trillion, which was a 22% increase on the previous year (Trump has already claimed this as his doing), as well as watching the world go crazy over Bitcoin, with cryptocurrencies appreciating by a whopping 1,200%!
Unfortunately, no one owns a crystal ball, so it would be safer to refrain from making any bold predictions on what will take place in 2018. However, there are two key changes to legislation you should be aware of.
Firstly, the Australian government has officially released the First Home Super Saver Scheme (FHSSS) to help eligible Australians save for their first home. This is achieved by allowing those who qualify to save part of their initial house deposit within the concessionally taxed Superannuation environment. To do this, individuals will need to make voluntary, pre tax contributions to their Superannuation fund, up to a maximum of $15,000 per annum and no more than $30,000 over a three year period. There will be tax paid on the contributions going into Superannuation and tax paid once the funds are withdrawn, however, the net result should be less than if funds were saved within an individual’s bank account.
As an example, if an individual earning $130,000 p.a. makes additional salary sacrifice contributions of $10,000 p.a. to their Superannuation for 3 years, they will have an estimated $24,777 available for deposit under the First Home Super Saver Scheme. These savings under the FHSSS are $6,191 more than they would have saved for the same amount in a savings account earning 2% p.a. interest.
For a more detailed summary on FHSSS and eligibility, read First Home Super Saver Scheme – what you need to know.
Secondly, and this one is going to be a big one for all parents of young children out there. From 1 July 2018, the Child Care Rebate, which is currently $7,613 per child per annum, is to be abolished and is being replaced with a Child Care Subsidy (CCS). There are three tests that will be applied to assess eligibility:
1) Combined family income Test
Under the new system, families with combined income less than $185,710 per annum, will have no cap on the amount of Child Care Subsidy they receive. The actual CCS received is based on a sliding scale from 85% to 50% of the daily fee, dependent upon income levels. Families earning above that threshold, but below $350,000 of combined income per annum will have their subsidy capped at 50% of the daily fee, up to $10,000 per annum.
2) Activity Test
The activity test is determined by how much time the parents work per fortnight, based on the activity of the parent who works the least.
As an extension to the combined family income test listed above, the work test per fortnight offers a varying number of subsidised childcare hours, based upon the parent who spends the least time working, training, studying or volunteering.
3) Service Type
The new system will set an hourly cap on the CCS, dependent upon the type of child care service provided. The hourly based subsidy is set at $11.55 an hour for centre-based care, $10.70 for family day care and $10.10 for out-of-school-hours care.
The final change is that previously, you could elect to receive the rebate as a quarterly refund, having paid the full child care expense, or have the childcare provider charge their daily fees net of the rebate. Going forward, the latter will be the only option. The subsidy will be paid directly to the childcare provider to pass on in the form of reduced fees.
What does it mean for you?
The best way to assess how you will be impacted by the changes to the Child Care Subsidy is by using this Government’s calculator.
2018 is well and truly bringing significant changes and some of these might impact your financial position moving forward. It is important that whenever your circumstances change or whenever legislative changes like these are put in place you re-evaluate your finances and take the necessary measures.
If you’re unsure where to start, your financial adviser or one of DPM’s Private Wealth Consultants can help you. Simply call 1800 376 376 or book a free no-obligation initial consultation to have a chat about your personal situation.
* The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.