The Federal Budget was released last night, Tuesday 9th May 2017, and while you were watching Netflix we were taking notes.

We’ve broken our summary down into a few sections so you can read what is relevant to you:

Small Business

Superannuation

Individuals

Property

Prior Year Changes


Small Business

The $20,000 instant asset write off is still in play and is now available to small businesses with turnover up to $10 million. The small business threshold test has accordingly been increased from $2 million to $10 million meaning more businesses can now access some of the small business tax concession perks such as pooling of depreciation BUT this hasn’t been extended to the CGT concessions if you sell your business which would have been nice to see. Maybe next year.

If you are in the courier or cleaning industries you’ll have a little more compliance work to do each year from 1 July 2018. Similar to the building and construction industry, you’ll need to complete taxable payments report each year. This is essentially a list of all sub-contractors including their ABN (where known), name, address, gross amount you paid for the financial year (this is the total amount paid including GST) and total GST included in the gross amount you paid.

Lastly if you are a small business and you contract to Government agencies then you probably know they are not the quickest payers of your invoices. This will change. Governments will now be required to pay invoice in 15 DAYS if your contract is <$1 million.


Superannuation

Last year in 2016 we saw multiple changes to super, this year there really is only one major change. If you are aged >65 and want to downsize your house,  you can contribute up to $300,000 from the proceeds of selling your home to super from 1 July 2018. Prior to this if you were retired and sold your home and bought something smaller you couldn’t contribute large chunks of cash into super. Now you can contribute up to $300,000 but the proceeds have to come from the sale of your principle place of residence that you must have owned for at least 10 years.

There was also a little clarification around the new $1.6 million pension cap in that it is calculated on Total Assets not Net Assets. I’d suggest chatting to your advisor if you estimate your pension account to be close to this.


Individuals

Again not much. The Medicare Levy will be increasing for EVERYONE from 1 July 2019 by 0.5%.

If you are looking to purchase your first home the Government has introduced a new superannuation saver scheme designed to help build a deposit. You can contribute an extra $15,000 to your super fund each year (up to a maximum of $30,000) which is taxed at 15%. If these funds were held in your own name any interest could be taxed at the top marginal rate. You can then make a withdrawal from 1 July 2018 for a first home deposit. I’d suggest getting advice on any tax consequences when you withdraw the funds and what options you have if you decide to not buy a home, are the monies now trapped in super until retirement?

At the moment you don’t have to repay your HELP/HECS debt until you earn over $51,957. From 1 July 2018 you will need to start repaying your HELP/HECS debt if you earn more than $42,000. Starting at 1% of your taxable income and increasing to 4% when you earn $57,730.


Property

So a couple of changes are in play here. First is from 1 July 2017 you will no longer be able to claim travel expenses for travelling to inspect or maintain the property(ies).

A BIGGER CHANGE is that to depreciation. Anyone owning an existing property at 9 May 2017 will still be able to claim depreciation as per usual. Any properties purchased after 9 May 2017 will only be able to claim depreciation on furniture and fittings (the same as plant and equipment) that they purchase. I’ll flesh this out a little:

So when you buy a rental property which is generally a land component and the home itself. The home can be depreciated in two ways:

  1. the structure of the home called capital works. This isn’t changing.
  2. the plant and equipment associated with the house. These are usually mechanical fixtures or those which can be “easily” removed from a property such as dishwashers and ceiling fans. This is what is changing.

So instead of being able to depreciate plant and equipment included in the property when you purchase it, these amounts will now be added to the cost base of the property meaning if you sell the property they will contribute to reducing any tax payable.

However if whilst owning the property YOU purchase plant and equipment then you will be able to claim a deduction for only the items you purchase.

Also if your investment is “affordable rental housing” the Capital Gains Tax Discount will increase from 50% to 60% however there is certain criteria that needs to be met.

Foreigners will also be charged a $5,000 tax on property they own that remains unoccupied (even though it is genuinely available for rent) at least 6 months per year. This is on top of removal of access to foreigners of the CGT main residence exemption and foreign ownership in new property developments will be capped at 50%.


Prior Year Changes

For business owners trading via a Company structure, the company tax rate for this 2017 Financial Year is 27.5% if your turnover is less than $10 million.

If your personal taxable income is >$250,000 from 1 July 2017 you will now pay 30% on your superannuation contributions (this is an increase from the standard 15%). Non-concessional super contributions are also reducing to $100,000 per year (or access the bring forward 3 years $300,000 limit). However for this year you can still contribute up to $540,000 but then it drops!

The new superannuation pension phase $1.6 million cap will start from 1 July 2017 so make sure you’ve got your ducks aligned.


If you are concerned how any of the above will affect your personal circumstances please reach out.