ASG News - Tax / View / Clue
2017/18 Federal Budget Highlights
On Tuesday, 9 May at 7.30pm, the Federal Treasurer, Mr Scott Morrison handed down his second budget focusing on boosting the economy and households.
The tax and superannuation highlights are set out below.
Individuals will be able to make voluntary contributions of up to $15,000 per year from 1 July 2017 and $30,000 in total, to be withdrawn subsequently for a first home deposit. Withdrawals can begin from 1 July 2018. Couples will be able to both access the scheme and combine savings for a single deposit.
A person aged 65 or over can contribute up to $300,000 from the proceeds of the sale of their home as a non-concessional contribution into superannuation, from 1 July 2018.
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.
Managed investment trusts will be able to invest in affordable housing, allowing investors to receive concessional tax treatment, provided certain conditions are met, including that the properties are let as affordable housing for at least 10 years.
The CGT discount for Australian resident individuals investing in qualifying affordable housing will be increased from 50% to 60% from 1 January 2018.
Foreign and temporary tax residents will be denied access to the CGT main residence exemption.
The foreign resident CGT withholding rate will be increased to 12.5% and will apply to Australian real property and related interests valued at $750,000 or more.
An annual levy of at least $5,000 will be imposed on foreign owners of under-utilised residential property.
A 50% cap on foreign ownership in new developments will be introduced through a condition on new dwelling exemption certificates.
The principal asset test in Div 855 of the Income Tax Assessment Act 1997 will be applied on an associate inclusive basis for foreign tax residents with indirect interests in Australian real property.
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.
Purchasers of new residential properties or new subdivisions will be required to remit the GST directly to the ATO as part of settlement from 1 July 2018.
The GST treatment of digital currency (such as Bitcoin) will be aligned with that of money from 1 July 2017.
Access to diplomatic and consular concessions under the Indirect Tax Concession Scheme has been extended.
The use of limited recourse borrowing arrangements will be included in a members total superannuation balance and transfer balance cap from 1 July 2017.
Opportunities for members to use related party transactions on non-commercial terms to increase superannuation savings will be reduced from 1 July 2018.
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.
The Medicare levy low-income thresholds for singles, families, and seniors and pensioners will increase from the 2016/17 income year.
A new set of repayment thresholds and rates under the higher education loan program (HELP) will be introduced from 1 July 2018.
Other tax changes
The foreign investment framework will be clarified and simplified with effect from 1 July 2017.
A major bank levy will be introduced for authorised deposit taking institutions (ADIs), with licensed entity liabilities of at least $100b, from 1 July 2017.
Businesses that employ foreign workers on certain skilled visas will be required to pay a levy that will provide revenue for a new Skilling Australians Fund from March 2018.
The taxation of roll your own (RYO) tobacco and other products (eg cigars) will be adjusted so that manufactured cigarettes and RYO tobacco cigarettes receive comparable tax treatment.
The government will provide additional funding to Treasury and the Office of Parliamentary Counsel to ensure dedicated drafting resources for relevant legislation.
Important: Clients should not act solely on the basis of the material contained in Cents & Sensibility. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Cents & Sensibility is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.
Please contact us if you wish to discuss how the points raised in this edition specifically affect you.
The ASG Team
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