Darryl Jess, wealth strategist and director of JSP Partners
There are a number of changes in the 2017 Federal budget which will affect businesses reading this edition of Grow magazine.
This budget is predominately a budget relating to housing affordability however there have been some positive changes for business.
These changes for business include the extension of the $20,000 instant asset write-off for the purchase of eligible assets costing less than $20,000 until 30 June 2018.
The assets must be first used, or installed ready for use by 30 June 2018.
Business with an aggregated turnover of up to $10 million can now utilise this immediate write off.
An eligible business that has a small business asset pool with a balance of less than $20,000 can have that balance immediately deducted.
The Casey Cardinia area population will continue to experience growth due to a number of factors arising from the budget.
The Capital Gains Tax discount for Australian resident (tax resident) individuals investing in qualifying affordable housing will be increased from 50 per cent to 60 per cent from 1 January 2018.
This concession comes with four conditions which must be satisfied.
A person over 65 years of age can now contribute up to $300,000 from the proceeds of the sale of their home into superannuation as a non-concessional contribution (non-tax deductable).
First home owners will be able to build a deposit inside their superannuation fund.
Voluntary contributions of up to $15,000 per year, or $30,000 in total, can be made.
The contributions will be taxed at 15 per cent at the time of contribution.
The contributions cannot be withdrawn before 1 July 2018.
At that time the contributions and earnings withdrawn will be taxed at the first home buyer’s marginal tax rate, less a 30 per cent offset.
A new integrity measure of the budget, as of July 1 2018, will require the purchasers of new residential properties or subdivisions to remit the GST directly to the ATO as part of the settlement process.
There are a number of changes affecting residential property investors as of July 1 2017. Deductions for travel expenses for the investor to either inspect, maintain or collect rent will no longer be deductable. Expenses paid to third parties for these services will remain deductions.
Plant and equipment depreciation deductions will be limited to actual outlays by investors.
Also subsequent owners of a residential investment property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property.
Self-managed superannuation funds will now be required to include the value of any limited recourse borrowing arrangements into the super balance and transfer balance caps.
Readers are reminded that well before the budget, announcements were made of reductions to concessional and non-concessional contributions to superannuation and to the taxation of members super balances in excess of $1.6 million, all of which apply from 1 July 2017.
As a result, the period prior to 1 July may be the last chance to maximise the top-up superannuation funds.
Foreign property investors came in for particular attention in the budget.
As of budget night, foreign and temporary tax residents have lost the ability to access the Capital Gains Tax exemption to their main residence.
A proposed $5000 charge will be made against foreign owners of residential property, where the property is not occupied or generally available on the rental market for at least six months per year.
Also a 50 per cent cap has been introduced on foreign ownership in new property developments.
In contrast to these restrictions on foreign investors, new flexible funding arrangements were introduced in April by the government in order to assist business to raise money from the public.
Other budget changes include:
· An increase in the Medicare levy from 2 per cent to 2.5 per cent of taxable incomes from 1 July 2019.
· A new minimum repayment threshold of $42,000 applies to the higher education loan program.
· Businesses employing foreign workers on skilled visas will have to pay an upfront levy of $1200 (businesses up to $10 million turnover) or $1800 per visa per employee on a temporary skill shortage visa to fund a new skilling Australians fund and a one-off payment of $3000 (up to $10 million turnover) or $5000 for a permanent employer Nomination Scheme or permanent Regional Sponsored Migration Scheme.
· There will be greater scrutiny of the application of the Capital Gains Tax concessions to small business – that means more audits.
· The taxable payments reporting system has been extended to include cleaners and courier Industries.
· Digital currency, such as Bitcoin, will be treated as money for GST purposes, removing the double GST burden on its use.
· Australian Tax Office given $28.2 million to target serious and organised crime within the tax system, as well as $32 million for additional audit and compliance programs to better target black economy risks.
· A prohibition to the manufacture, distribution, possession, use or sale of electronic point of sale, sales suppression technology and software – that implies jail terms.
Please note that all of these measures will be subject to the government being able to successfully pass the measures through the Senate.
Darryl Jess is a taxation and business strategist and founder of JSP Partners Chartered Accountants. He is a former chair of Chartered Accountants Australia and New Zealand Public Practice Advisory Committee and a professional presenter.
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