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WATCH OUT: TOP TAX CHANGES in 2017-18

Keeping pace with the changing dynamics of the Australian economy, Australian Taxes are changing and some of these changes may affect you as tax payers. Presented below is a summary of the top tax changes in 2017-18.

Should you have further queries or want a discussion to review your situation, call us at Fortuna Advisory Group to book in: 08 9240 4211.

 

SMALL BUSINESSES AND COMPANIES

  • The corporate tax rate for base rate entities is 27.5% from 1 July 2017. A company is a base rate entity if it carries  on  business  and   has   an  aggregated  turnover  for  the   year  that   is  less   than $25m
  • The ATO will be allowed to disclose to Credit Reporting Bureaus the tax debt information of businesses that have not effectively engaged with the ATO to manage these debts from 1 July 2017
  • Simplified BAS reporting is applies to small business entities from 1 July 2017.

SUPERANNUATION

  •  The tax on working holiday makers’ superannuation payments when  they leave  Australia is 65%, from 1 July 2017
  • The low income superannuation contribution scheme is abolished from 2017/18; a low income superannuation tax offset will be available for 2017/18 and later  years
  • The restriction on funds accepting fund-capped contributions has been abolished from 1 July 2017
  • A $1.6m transfer balance cap applies to the total amount of accumulated superannuation an individual can transfer into the  tax-free retirement phase from 1 July 2017
  • The threshold at which high income earners are liable for Division 293 tax has been lowered from $300,000 to $250,000 from 1 July 2017
  • The annual cap on concessional contributions has been reduced to $25,000 from 1 July 2017 for all individuals regardless of their age
  • From 1 July 2017, the annual non-concessional contributions cap has been reduced to $100,000; individuals with a superannuation balance of more  than $1.6m are not eligible  to make  non-  concessional contributions from 1 July 2017
  • The 10% test to determine an individual’s eligibility for deductions for personal superannuation contributions has been removed from 1 July 2017; contributions to certain prescribed funds are not tax-deductible
  • Eligibility for the spouse contributions tax offset has  been extended to individuals whose  spouses earn up to $40,000 from 1 July 2017
  • The tax exemption for income derived from assets has been changed to apply only to income streams in the retirement phase. Individuals can not treat superannuation income stream payments as lump sum superannuation benefits for tax purposes from 1 July 2017
  • The anti-detriment provision, which allows superannuation funds to claim a tax deduction for a portion of the death benefits paid to  eligible   dependents,  has   been  removed from  1  July  2017
  • Transitional CGT relief applies for assets transfers in connection with changes to the tax treatment transition to retirement income streams and compliance with the  superannuation transfer cap
  • An individual’s total superannuation balance concept is used to determine eligibility for various tax concessions from 1 July 2017
  • A superannuation transfer balance cap will limit the total amount of accumulated superannuation that  an individual can transfer into the  tax-free retirement phase from 1 July 2017; excess transfer balance tax is payable for exceeding the  cap.

CAPITAL GAINS TAX

  • The CGT foreign resident withholding rate is 12.5% from 1 July 2017 (previously 10%) and  the  threshold at which the  CGT withholding obligation applies to Australian real  property has  been reduced to $750,000 (previously $2m)
  • The CGT main residence exemption will no longer be available to foreign  and  temporary tax residents from 7.30 pm (AEST) on 9 May 2017
  • From 1 July 2017, CGT event E4 will not arise where  a trust receives a tax-free capital gain under the  early stage innovation company provisions.

GOODS AND SERVICES TAX

  • GST extends to cross-border supplies of services and intangibles, such as digital  products, to Australian consumers from 1 July 2017
  • The definition of ‘‘financial supply’’ has been extended to include the supply  of bank  accounts and superannuation interests by foreign  financial institutions from 1 July 2017
  • The GST treatment of digital currency such as bitcoin  will be aligned with that  of money  from 1 July 2017 to avoid potential double taxation
  • GST reporting and record-keeping has  been simplified from 1 July 2017 for small  businesses with a turnover of less  than $10m.

FRINGE BENEFITS TAX

  • For the FBT year commencing 1 April 2017, the FBT rate  is 47%.

INTERNATIONAL

  • The diverted profits tax (DPT) applies to tax benefits under a relevant scheme derived in income years commencing on or after 1 July 2017
  • Failure-to-disclose penalties have been increased for significant global entities, with effect  from 1 July 2017
  • The foreign investment framework will be clarified and  simplified with effect  from 1 July 2017 to make  foreign investor obligations clearer.

TOFA

  • The TOFA regime will be reformed to reduce its scope, decrease compliance costs, and increase certainty, with effect  for income years  on or after  1 January 2018
  • The tax hedging regime will be amended to make it easier to access, encompass more  types  of risk management arrangements, and  remove the  direct  link to financial accounting. The new rules will apply to income years  on or after  1 January 2018
  • The functional currency rules will be changed to extend the range of entities that  can use  a functional currency for income years  on or after  1 January 2018
  • From 1 July 2018, key barriers to the use of asset-backed financing  arrangements, which are supported by assets, such  as deferred payment arrangements, and  hire purchase arrangements will be removed.

OTHER CHANGES

  • From 1 July 2017, travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed
  • Eligibility for deductions for depreciating plant and equipment in a residential rental property will be limited to the taxpayer that  actually incurred the  outlay  to purchase the  plant and  equipment and  not to successive investors in the  property, from 1 July 2017
  • From 1 July 2017, the Commissioner will limit a taxpayer’s instalment rate in cases where  the  normal rules  would otherwise produce a very high rate.

 

 

 Source:  Wolters Kluwer