Last night, Treasurer Scott Morrison handed down the Federal Government’s Budget.
Please find enclosed a full report summarising the tax & accounting measures introduced that will come into effect from 1 July and onwards. The key measures that are likely to be applicable to the majority of our clients I have highlighted below.
If you wish to discuss any of these measures in further detail, please don’t hesitate to contact our office.
Individuals
- The Medicare levy will be increased from 2.0% to 2.5% of taxable income from 1 July 2019. Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased.
- Low income earners will continue to receive relief from the Medicare levy through the low income thresholds for singles, families, seniors and pensioners. The current exemptions from the Medicare levy will also remain in place.
- A new set of repayment thresholds and rates under the higher education loan program (HELP) will be introduced from 1 July 2018.
- A new minimum repayment threshold of $42,000 will be established with a 1% repayment rate. Currently, the minimum repayment threshold for the 2017/18 year is $55,874 with a repayment rate of 4%.
Properties
- Deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed from 1 July 2017.
- Plant and equipment depreciation deductions will be limited to outlays actually incurred by investors in residential real estate properties from 1 July 2017.
- The CGT discount will be increased from 50% to 60% for Australian resident individuals investing in qualifying affordable housing.
- Individuals who are foreign or temporary tax residents will no longer have access to the CGT main residence exemption from 7.30pm (AEST) on 9 May 2017. Existing properties held before this date will be grandfathered until 30 June 2019.
- Foreign owners of vacant residential property, or property that is not genuinely available on the rental market for at least six months per year, will be charged an annual levy of at least $5,000.
Small business
- The tax rate for companies for the 2016/17 financial year will reduce to 27.5% for businesses with turnover below $10 million.
- Access to the small business CGT concessions will be tightened from 1 July 2017 to deny eligibility for assets which are unrelated to the small business.
- The $20,000 instant asset write-off for small business will be extended by 12 months to 30 June 2018, for businesses with an aggregated annual turnover of less than $10m. From 1 July 2018, the immediate deductibility threshold, and the balance at which the pool can be immediately deducted, will revert to $1,000.
Superannuation
- The use of limited recourse borrowing arrangements (LRBAs) will be included in a member’s total superannuation balance and transfer balance cap from 1 July 2017.
Access to super for first home deposit
- Individuals will be able to make voluntary contributions into their superannuation of up to $15,000 per year and $30,000 in total, to be withdrawn subsequently for a first home deposit. The contributions can be made from 1 July 2017 and must be made within an individual’s existing contribution caps.
Super contributions from downsizing
- A person aged 65 or over can make a non-concessional contribution into superannuation of up to $300,000 from the proceeds of selling their principal residence. They must have owned their principal residence for at least 10 years. This measure will apply from 1 July 2018 and is available to both members of a couple for the same home.
Tax Crackdown
- The government will provide $28.2m to the ATO to target serious and organised crime in the tax system.
- The taxable payment reporting system (TPRS) will be extended to include two high-risk industries — cleaning and couriers — to ensure payments made to contractors in these sectors are reported to the ATO. This system is already in place for the building and construction industry.
If you wish to discuss any of these measures in further detail, please don’t hesitate to contact our office.
