On the 9th of May 2017, the Federal Treasurer, Scott Morrison, handed down the Federal Budget for 2017-18. Now the dust has settled we outline the Government’s revenue measures (which are heavily linked to the big banks and wage earners) and spending measures (designed to achieve fairness and opportunity). Unfortunately however, the eagerly anticipated meaningful tax reforms are not present.
Goods and services tax, Capital gains tax, tax return preparation and compliance and fringe benefits taxes all remain largely unaffected.
As with all budget announcements, these announcements are not final until the relevant legislation has received Royal Ascent. Therefore it is important you use caution if applying the announcements before they become law. We will update you on the status of these proposed announcements.
We outline below some of the key tax announcements from the budget.
The $20,000 instant asset write-off and accelerated depreciation is extended by 12 months to 30 June 2018. It is also extended to businesses with up to $10 Million turnover threshold (from $2 Million). From 1 July 2018, the deduction threshold will revert back to $1,000.
The Medicare levy will increase from 2% to 2.5% from 1 July 2019 to fund the National Disability Insurance Scheme. Low income earners will receive relief from the Medicare Levy by the increase of the low-income threshold for singles, families, seniors and pensioners.
Couriers and Cleaners
From 1 July 2018, the taxable payments reporting system will be extended to couriers and cleaners. This reporting system is already operating in the building and construction industry.
- From 1 July 2017, the Government will disallow deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property.
- From 1 July 2017, plant and equipment depreciation deductions will be limited to outlays actually incurred by investors in residential real estate properties. These changes will apply on a prospective basis, with existing investments grandfathered. Plant and equipment forming part of residential investment properties as at 9 May 2017 (including contracts already entered into at 7:30pm on 9 May 2017) will continue to give rise to deductions for depreciation until either the investor no longer owns the asset, or the asset reaches the end of its effective life.
- From 1 January 2018, the capital gains tax discount will be increased from 50% to 60% for resident individuals who elect to invest in qualifying affordable housing. The affordable housing must be managed through a registered community housing provider and the investment must be held for a minimum of 3 years.
- Foreign and temporary residents will no longer be able to claim the CGT (Capital Gains Tax) main residence exemption.
- Foreign residents that hold real estate will be charged at least $5,000 per year if their properties are not rented or available for rent for at least 6 months per year. This measure is intended to encourage foreign owners of residential property to make their properties available for rent where they are not used as a residence, thus increasing the number of dwellings available for rent.
- The foreign resident withholding regime for the sale of real property will apply to the sale of properties valued at $750,000 or more (the current threshold is $2 million).GST on New PropertyFrom 1 July 2018, purchasers of newly constructed residential premises or new subdivisions will be required to remit the GST on the purchase directly to the ATO as part of settlement. Under the current law, some developers are failing to remit GST to the ATO despite having claimed the GST credits on their construction costs.
HECS / HELP Repayments
From 1 July 2018, the minimum repayment threshold for HECS / HELP loans will be reduced to $42,000 with a 1% repayment rate (currently the minimum threshold for repayment is $54,869 with a repayment rate of 4%). The maximum threshold will be increased to $119,882 with a 10% repayment rate (this is currently $101,900 with a repayment rate of 8%).
Plan to Address Housing Affordability
First Home Buyers
From 1 July 2017, first home buyers will be able to build a home deposit inside superannuation. Voluntary contributions up to $15,000 per year and $30,000 in total will attract concessional tax treatment under the First Home Super Saver Scheme. The contributions and deemed earnings, net of tax, can be withdrawn from 1 July 2018. The contributions must be made within the existing superannuation contributions cap.
Older Australians Downsizing
From 1 July 2018, Australians aged 65 or over can make a contribution into super of up to $300,000 from the sale of their principal place of residence which has been held for at least 10 years. This contribution will be in addition to the current contributions permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance for making non-concessional contributions. Both members of a couple will be able to take advantage of this measure for the some principal place of residence.
Please do not hesitate to contact us on (07) 5607 0820 if you have any questions regarding the 2017- 18 Federal Budget.
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