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The Australian government has just announced 2017 Federal Budget tonight. At Pitt Martin, we closely keep update our knowledge with government tax legislation and economy changes. Here is some key points we think can be relevant to the tax payers and business owners.

Housing

  • Assisting first home buyers to build a deposit inside superannuation. Voluntary contributions of up to $15,000 per year and $30,000 in total will attract concessional tax treatment under the First Home Super Saver Scheme. This voluntary contribution can be salary sacrifice. The concessional tax rate will be 15% rather than personal marginal rate which is normally over 30%. The scheme commences on 1 July 2017, and contributions and deemed earnings, net of tax, can be withdrawn from 1 July 2018;

 

  • Allowing older Australians to contribute downsizing proceeds into superannuation. From 1 July 2018, individuals aged 65 and over will be able to make a non-concessional contribution of up to $300,000 in proceeds from the sale of a principal residence, held for at least 10 years, into their superannuation. These new contributions will be in addition to any other voluntary contributions that people are able to make under the existing contribution rules and concessional and non-concessional caps. That means potentially such an individual can make overall $625,000 contribution into their super fund in one year from 1 July 2018 by current law;

 

  • Capital gains tax (CGT) will be increased to 60% for investment in affordable housing. Allowing Managed Investment Trusts to be used to develop and own affordable housing, providing investors in affordable housing with greater income certainty by enabling direct deduction of welfare payments from tenants;

 

  • Strengthening the capital gains tax (CGT) rules to reduce the risk that foreign investors avoid paying CGT in Australia, including by no longer allowing foreign or temporary tax residents to claim the main residence CGT exemption, and by expanding the scope of the CGT withholding system for foreign residents;

 

  • Encouraging foreign owners of residential real estate to rent their properties out by applying a ‘ghost tax’ of at least $5,000 (reflecting the original application fee) to foreign owners who leave their properties unoccupied or not available for rent for 6 months or more each year.

 

 

  • Disallow deductions for travel expenses related to owning a residential investment property. Better target plant and equipment depreciation deductions to those expenses actually incurred by investors.

Business

  • More tax breaks and red tape reduction are on the cards this year, with the $20,000 instant asset tax write-off introduced in the 2016 budget being extended for another year until 2018, and opened up to businesses with an annual turnover of up to $10 million which is used to only up to $2 million.

 

  • From March next year, government introduce a levy on foreign workers on certain skilled visas will go towards a new Skilled Australians Fund.

Small business employer will have to pay $1200 per year for a foreign worker, along with a one-off $3000 payment. Larger businesses employer would pay $1800 a year per worker, along with a one-off payment of $5000.

 

  • The Government is stamping out hybrid tax abuse by multinational banks and insurance companies to prevent the exploitation of tax differences between countries. The Government is also toughening the Multinational Anti-Avoidance Law by extending it to corporate structures involving foreign partnerships and foreign trusts.

 

  • The Government is extending the taxable payments reporting system to contractors in the courier and cleaning industries and also banning technology that allows businesses to falsify sales records to avoid paying tax.

Medicare Levy

  • The Government will increase the Medicare levy from 2 per cent to 2.5 per cent of taxable income from July 1, 2019 to fund the National Disability Insurance Scheme. You’ll only be exempt if your income is below the threshold of $21,655 for singles, $36,541 for families and $34,244 for pensioners. Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased.

If you want to find out more details about how this budget affects you, please feel free to contact us.

Pitt Martin Accountants & Tax Advisers is located at Martin Place in Sydney CBD. We can be reached on +61 2 92213345 or connect@pittmartin.com.au.