The Government handed down the Federal Budget back on 9 May 2017 and here is a quick summary of what you need to know about what changes are in store for next year.
INCREASING THE MEDICARE LEVY LOW-INCOME THRESHOLDS
Date of Effect: 2016-17 income year.
Details: You will not be required to pay Medicare Levy (2%) if your taxable income is less than:
Singles: $21,655.
Families: $36,541 (plus $3,356 for each dependent child/student)
Single Seniors/Pensioners: $34,244
Family Seniors/Pensioners: $47,670 (plus $3,356 for each dependent child/student)
Note: Proposed Medicare Levy rate will rise from 2% to 2.5% from 1 July 2019.
SMALL BUSINESS AGGREGATED TURNOVER TEST
Date of Effect: 2016-17 income year.
Details: The small business aggregated turnover threshold will increase from $2 million to $10 million to access the small business concessions.
Note: The CGT small business concession will remain at $2 million.
TEMPORARY BUDGET REPAIR RELIEF
Date of Effect: Ending 30 June 2017.
Details: The 2016-17 income year will be the last year the levy will take place. This will only affect high income tax earners where a rate of 2% is charged for any taxable income over $180,000.
TRAVEL DEDUCTIONS TO RENTAL PROPERTIES
Date of Effect: Ending 30 June 2017.
Details: Effective 1 July 2017, the ATO has scrapped all travel expenses in relation to inspecting, maintaining or collecting rent from residential rental properties. The Government has put this measure in place as rental property owners have not correctly apportioned their travel costs that were private in nature. If you wish to make any eligible travel claims, you must do this now before 30 June 2017.
RESTRICTIONS ON CLAIMING DEPRECIATION ON RESIDENTIAL RENTAL PROPERTIES
Date of Effect: 7:30pm (AEST) 9 May 2017.
Details: The Government wants to limit plant and equipment (P&E) deductions incurred by subsequent residential property owners. The Government is concerned that the P&E items that are owned by subsequent owners of the property are depreciated more than their actual value (i.e. Owners who engage for a professional building surveyor to review and produce a depreciation schedule on the rental property).
Therefore, all P&E items purchased after 7:30pm (AEST) 9 May 2017 can be claimed by taxpayers for the effective life of the asset but any assets purchased by the previous owner will be added to the cost base of the property and no depreciation can be claimed.
CGT MAIN RESIDENCE AND FOREIGN RESIDENTS
Date of Effect: 7:30pm (AEST) 9 May 2017.
Details: Foreign and temporary tax residents will be denied access to the CGT main residence exemption for properties acquired after 9 May 2017. For those who hold property before this date, this will remain CGT free until 30 June 2019.
ANNUAL VACANCY CHARGES TO FOREIGN OWNERS OF RESIDENTIAL PROPERTY
Date of Effect: 7:30pm (AEST) 9 May 2017.
Details: The Government wants to introduce charges on foreign owners of Australian residential properties when the property is not occupied or genuinely available on the rental market for at least 6 months of the year. This proposal is expected to increase the number of residential properties to be made available for Australians to live in. This charge will be levied annually and will be charged accordingly to the relevant foreign investment application fee imposed on the property at the time the property was acquired from after 7:30pm (AEST) on 9 May 2017.
FOREIGN RESIDENTS AND CGT WITHHOLDING TAX
Date of Effect: 1 July 2017 (Proposed date).
Details: CGT withholding tax rate for foreign residents selling Australian property will increase from 10% to 12.5% when they enter into a contract for sale from 1 July 2017. The CGT withholding threshold for foreign tax residents selling Australian property will reduce from $2 million to $750,000. Therefore, foreign residents will be required to remit 12.5% to the ATO for purchase prices above $750,000.
CHANGES TO FTB PART A PAYMENTS
Date of Effect: 1 July 2017.
Details: Family Tax Benefit Part A supplement payments will decrease by $28 per fortnight for each child who does not meet the Government’s immunisation requirements.
FIRST HOME SUPER SAVER SCHEME
Date of Effect: Contributions from 1 July 2017 however withdrawals from Super funds can only be made from 1 July 2018
Details: First home buyers will now be able to salary sacrifice super then withdraw funds from the super fund to purchase their first home. Usually a person cannot withdraw from their super fund until they have reached 55-60 years of age.
A maximum of $15,000 per year can be salary sacrifice (keep in mind the maximum $25,000 concessional contribution threshold) with a maximum amount of $30,000 that can be contributed toward this scheme.
INCREASED CGT DISCOUNT FOR INVESTMENTS IN QUALIFYING AFFORDABLE HOUSING
Date of Effect: 1 January 2018.
Details: The CGT general discount will increase from 50% to 60% on capital gains made on the sale of investments in qualifying affordable housing. To be eligible, the housing must be provided to low to moderate income tenants with rent charges at a discount that is below the private rental market rate. Affordable housing must be managed through a registered community housing provider and the property to be help for a minimum of 3 years.
BUSINESS TO PAY LEVY ON SKILLED WORKER VISAS
Date of Effect: March 2018.
Details: A business that employs a foreign worker on certain skilled visas will be required to pay a levy that will provide increased revenue to the Skilling Australians Fund.
Business with < $10 million turnover per year will need to make an upfront payment of $1,200 per visa per year for each employee on a Temporary Skill Shortage visa and $3,000 for each employee being sponsored for a subclass 186 visa (permanent Employer Nomination Scheme) or subclass 187 visa (permanent Regional Sponsored Migration Scheme).
Business with > $10 million turnover per year will need to make an upfront payment of $1,800 per visa per year for each employee on a Temporary Skill Shortage visa and $5,000 for each employee being sponsored for a subclass 186 visa (permanent Employer Nomination Scheme) or subclass 187 visa (permanent Regional Sponsored Migration Scheme).
$20,000 IMMEDIATE WRITE OFF
Date of Effect: Extended until 30 June 2018.
Details: The small business $20,000 immediate write off on certain assets was suppose to end 30 June 2017 however this will now be extended until 30 June 2018.
MINIMUM HELP DEBT REPAYMENT THRESHOLD REDUCED
Date of Effect: 1 July 2018.
Details: The Government has proposed to change the threshold for faster Help debt repayments. The minimum repayment threshold will be reduced from $55,874 (2017-18 year) to $42,000 (from 1 July 2018).
PURCHASERS (NEWLY CONSTRUCTED RESIDENTIAL PROPERTIES) TO REMIT GST DIRECTLY TO THE ATO
Date of Effect: 1 July 2018
Details: The Government has proposed that the purchaser of newly constructed residential properties or subdivision to remit the GST directly to the ATO (as opposed to the developer) as part of the settlement. These changes do no have any impact on the purchaser however will increase the ATO’s GST revenue as the ATO will not have to wait for the developer to remit the GST to the ATO.
SUPER CONTRIBUTIONS TO THOSE DOWNSIZING THEIR HOMES
Date of Effect: 1 July 2018
Details: Those individuals that are 65 years and over will be allowed to make non-concessional super contributions up to a maximum of $300,000 when they sell their residential home that they have owned and resided for at least 10 years. The contribution will not count towards the non-concessional contribution cap however they will not need to meet the existing maximum age, work or $1.6 million tests.
If you wish to discuss or want more information about these changes, please feel free to contact us. We strongly advise to consult your accountant and/or financial advisor before making any business/personal decisions from these tax changes.
