Here is a quick summary of Superannuation changes from the Budget announcement:
First home super saver scheme
Effective starting 1 July 2017 first homebuyers can make voluntary super contributions up to $15,000 per year and a total of $30,000.
Existing concessional and non-concessional contribution caps apply. These contributions are able to be withdrawn, including deemed earnings for a first home deposit from 1 July 2018 onwards. Concessional contributions and earning that are withdrawn will be taxed at taxpayer’s marginal tax rate less a 30% offset.
Limited Recourse Borrowing Arrangements LRBAs are included in a member’s total superannuation balance and transfer balance cap from 1 July 2017, ensuring LRBAs aren’t used to circumvent caps.
Downsizing Incentive Any person aged 65 or over can make a Non-Concessional Contribution (NCC) of up to $300,000 from the proceeds of selling their home from 1 July 2018. This NCC will be in addition to those currently permitted under existing rules and caps and will be exempt from the age test, work test and the $1.6 million balance test. Eligibility requires ownership of the property for the past 10 or more years. Both members of a couple can take advantage of the measure for the same home.
Foreign Investors and Residents
“Ghost house tax” and other restrictions on foreign investors (stricter CGT rules etc).
Starting 9 May 2017, a charge of at least $5,000 on foreign owners of residential rental properties that are not occupied or available for rent for at least 6 months per year. Levied annually.
Starting 9 May 2017, foreign and temporary tax residents unable to access CGT main residence exemption. Existing properties grandfathered until 30th June 2019.
Starting 9 May 2017. New developments will have a 50% cap on foreign ownership.
Starting 1 July 2017 – foreign resident CGT withholding tax rate increased from 10% to 12.5%. The withholding threshold also decreases from $2 million to $750,000.
457 visas will be replaced by a new temporary skill shortage visa. Commencing March 2018 annual foreign worker levy of $1,200 - $1,800 per visa per year for temporary skill shortage or $3,000 to $5,000 per visa per year for sponsored.
Students The HECS and HELP threshold decreases from $52,000 to $42,000 effective from 1 July 2018.
Related Party Transactions Non-arms length provisions will be amended to ensure expenses, that would normally apply in a commercial transaction, are included when considering a transaction is on a commercial basis. This takes effect from 1 July 2018.
Black economy Black economy contractor reporting measures extended to cleaning and courier businesses. One year extension $32 million ATO audit funding for black economy compliance activities.
Small Business Changes Any small business with an aggregated annual turnover less than $10 million can access $20,000 instant asset write-off for another year. This will allow for immediate write off of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2018.
CGT Concessions Integrity measures to restrict eligibility to ensure only small business taxpayers with aggregated turnover of less than $2 million or business assets less than $6 million.
Rental Property Depreciation For residential investment properties acquired from 9 May 2017, limits depreciation deductions on plant and equipment to outlays actually incurred by investors. For example, if you buy a new dishwasher for your rental property you can still depreciate it – HOWEVER when you sell the property the new owner cannot continue to depreciate the asset. It remains as part of the cost base of the property.
Travel Expenses for Rental Property Effective from 1 July 2017 you can no longer claim a tax deduction for travel expenses relating to inspecting, maintaining or collecting rent for a residential rental property. Deductions can still be claimed for expenses relating to property managers inspecting the property.
Medicare Levy Changes Low-income thresholds:
Threshold for singles increased to $21,655.
Family threshold increased to $36,541 plus $3,356 for each dependent child or student.
Single seniors or pensioners increased to $34,244.
Family threshold for seniors or pensioners increased to $47,670 plus $3,356 for each dependent child or student.
From 1 July 2019, Medicare levy increase from 2% to 2.5% other tax rates linked to the top personal tax rate will also increase.
For more information, please contact our office.