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FEDERAL BUDGET 2017

The Federal Government announced its Budget for 2017-18. Many believe that it indicates that the government is in a state of readiness for an earlier than expected election.

 

So what were the main changes impacting tax, super and small businesses?

PERSONAL INCOME TAX

Restriction on depreciation deductions

From 1 July 2017, the Government will limit plant and equipment depreciation deductions to outlays actually  incurred  by  investors  in  residential  properties.  Plant  and  equipment  items  are  usually mechanical fixtures, or those that can be ‘easily’ removed from a property such as dishwashers and ceiling fans.  These changes will apply on a prospective basis, so properties under contract as of 9 May remain unaffected.

Investors who purchase plant and equipment for their residential investment property after 9 May 2017 will be able to claim a deduction over the effective life of the asset.  However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous  owner  of  that  property.  Acquisitions  of  existing  plant  and  equipment  items  will  be reflected in the cost base for CGT purposes for subsequent investors.

No deduction for residential property travel expenses

From 1 July 2017, the Government will disallow deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property.

Increased CGT discount for investments in affordable housing

From 1 January 2018, the Government will increase the CGT discount from 50{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} to 60{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} for resident individuals who elect to invest in qualifying affordable housing.

To qualify for the higher CGT discount, housing must be provided to low to moderate income tenants, with rent charged at a discount below the private rental market rate. The affordable housing must be managed  through  a  registered  community  housing  provider  and  the  investment  held  for  a  minimum period of three years.

 Medicare Levy to increase to 2.5{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} 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.

Higher Education HELP changes mean faster repayment

From 1 July 2018, new minimum threshold of $42,000 (down from $54,000) will be established with a 1{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} repayment rate and a maximum threshold of $119,882 with a 10{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} repayment rate.

 

SMALL BUSINESSES

Company tax rate changes

This means that the companies with aggregated turnover under $10m in 2017 financial year have access to 27.5{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} tax rate.

Higher instant write-off threshold extended.

The Government has  proposed  to  extend  the  concession  by  12  months to  30 June 2018  for  businesses  with  an aggregated annual turnover less than $10 million.

New integrity measure for the small business CGT concessions

This is ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.

SUPERANNUATION

There are no major new super measures but the 1 July super reforms from the last budget loom large. Don’t forget to get in touch for our annual tax planning so that action can be taken before 30 June.

Individuals aged  65  or  over  able  to  contribute  the  proceeds  of downsizing into superannuation (up to $300K)

From 1 July  2018,  the  Government  will  allow  a  person  aged  65  or  over  to  make  a NCC of  up  to $300,000 from the proceeds of selling their home.  These NCCs (non- concessional contributions) will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance test for making NCCs

First home super saver scheme

Government to allow future voluntary contributions to superannuation made by first home buyers from 1 July 2017 to be withdrawn for a first home deposit, along with associated deemed earnings.

Up to $15,00 p.a. and $30,000 in total can be contributed, within existing caps from 1 July 2017. Withdrawals will be allowed form 1 July 2018.

FOREIGN INVESTORS

  1. Restricting foreign ownership in new developments to 50{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14}
  2. Denying foreign and temporary residents access to main residence exemption
  3. Increasing CGT withholding rate from 10{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} to 12.5{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} from 1 July 2017
  4. Reducing CGT withholding threshold from $2m to $750K from 1 July 2017
  5. Charge on foreign owners of under-utilised residential property (at least $5,000 where not occupied or genuinely available for rent for at least 6 months/ year)

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