Month: May 2017

The Federal Government announced its Budget for 2017-18.

The pre-Budget announcement of needs-based school funding – together with big bets on infrastructure, the removal of the Medicare rebate freeze, a crackdown on non-residents investing in Australian real estate and a one year reprieve for the popular small business $20,000 instant asset write-off – will have broad appeal to voters.

PERSONAL TAXATION

• Personal tax rates – no change: 2% Budget deficit levy to end on 30 June 2017
• Medicare levy to be increased to 2.5% from 1 July 2019
• Medicare levy low-income thresholds for 2016-17
• Higher Education HELP changes announced: faster repayment and threshold changes
• Tax free payments to child sexual abuse survivors
• Changes to FTB Part A payments
• A standard tax deduction for work expenses? Not in this Budget

BUSINESS TAXATION MEASURES

• Major bank levy from 1 July 2017
• Company tax rate: Govt re-commits to remainder of 10-year package to further reduce rate
• CGT small business concessions: restricted to assets used in business
• Business to pay levy on certain skilled visas
• Using stapled structures to re-characterise trading income – comment period for consultation paper

TAX COMPLIANCE AND INTEGRITY

• MAAL to apply to broader range of entities
• Taxable payments reporting system extended to couriers and cleaners
• Extension of funding for black economy audits
• Prohibition on sales suppression software
• Extra funds for ATO to target serious crime
• OECD hybrid mismatch rules to be applied to regulatory capital

GST AND INDIRECT TAXES

• GST treatment of digital currency
• New residential premises: purchasers to pay GST
• Diplomatic and consular indirect tax concessions extended

HOUSING AFFORDABILITY

• Housing affordability measures
• Annual charge on foreign owners of underutilised residential property
• Restriction on depreciation deductions
• Housing affordability – unlocking supply
• No deduction for residential rental property travel expenses
• Improving outcomes for social housing
• Increased CGT discount for investments in affordable housing
• MIT investment in affordable housing
• CGT changes for foreign investors
• Foreign ownership in new developments limited to 50%

 SUPERANNUATION

• No major new super measures, but 1 July super reforms loom large
• Merging super funds: tax relief extended until 1 July 2020
• Super fund related-party transactions – non-arm’s length income rules to be amended
• Super borrowings – LRBA integrity measure for pension cap
• Super contributions of proceeds up to $300,000 from downsizing a home
• First home super saver scheme

OTHER MEASURES

• Govt agrees with Ramsay Review – new one-stop shop for financial complaints
• Changes to the financial system
• Competition in financial system: Productivity Commission inquiry announced
• Simpler framework for foreign investment framework Extending crowd-sourced equity funding
• 457 visa changes confirmed: accountants/tax practitioners still on list
• Changes to social security measures

The Government has recently introduced significant changes affecting superannuation pensions, which apply from 1 July 2017.  The purpose of this post is to inform you of the key changes, as they may impact you if you currently receive a superannuation pension or plan to commence a pension from your superannuation fund on or after 1 July 2017.

From 1 July 2017, the key changes affecting superannuation pensions include the following:

(a)   New $1.6 million ‘transfer balance cap’ (‘TBC’) – The total amount an individual can transfer into a tax-free pension phase including, for example, as an ABP, in one or multiple funds, will be capped at $1.6 million from 1 July 2017.  However, subsequent earnings on the assets supporting a pension will not be restricted. By way of comparison, prior to 1 July 2017, there is no limit on the amount that may be held as a tax-free pension interest.

• Roll-back of excess amounts – An individual who breaches their TBC will be required to transfer the excess amount (plus notional earnings thereon) into an accumulation account (or withdraw the excess amount from superannuation, if applicable) to avoid losing the pension exemption on the pension. Special rules apply for defined benefit pensions.
• Penalties – A 15% tax will apply to notional earnings on the excess amount. Second and subsequent breaches will be taxed at 30%.  However, as a transitional measure, if, on 1 July 2017, an individual exceeds the cap by less than $100,000, penalty tax (and notional earnings) will not be imposed, provided the breach is rectified by 31 December 2017.
• Transitional CGT relief for pension assets – Funds may elect to reset the cost base of certain assets to their market value where a fund member rolls-back their pension to accumulation phase before 1 July 2017 to comply with the TBC. This is important relief as it can help minimise any potential future CGT exposure with respect to these assets.

(b)  Removal of the tax exemption for Transition to Retirement Income Streams (‘TRIS’) – From 1 July 2017, the pension earnings exemption will be removed for assets supporting a TRIS, regardless of the date it commenced.  As a result, earnings on these assets will generally be taxed at 15% (and the TRIS will not ‘count’ for the purposes of the TBC).  CGT relief is available in respect of a TRIS asset (although no commutation is generally required).

(c)   Lump sum election – From 1 July 2017, individuals will no longer be able to elect to treat regular superannuation pension (e.g., TRIS) payments as a lump sum for tax purposes (which are tax-free up to the ‘low rate cap amount’ of $195,000 for the 2017 income year).

The Government has recently introduced significant changes affecting superannuation contributions, most of which apply from 1 July 2017.  The purpose of this post is to inform you of the key changes, as they may impact on your future contribution plans in particular.

From 1 July 2017, the following key changes to the contribution rules will apply:

• Non-concessional (or personal non-deductible) contributions
• Reduced non-concessional contribution limits – The annual contribution limit has been reduced from $180,000 to $100,000 per person. Furthermore, the $540,000 ‘bring forward amount has been reduced to $300,000 (i.e., 3 x the $100,000 annual non-concessional contributions limit).
• New $1.6 million superannuation balance restriction for non-concessional contributions – An individual who has total superannuation entitlements of at least $1.6 million at the start of an income year will not be able to make non-concessional contributions in that year without breaching their limit.
• A reduced concessional (or deductible) contributions limit – The annual limit in respect of concessional (or deductible) contributions (e.g., employer contributions and personal deductible contributions) has been reduced from $30,000 or $35,000 (depending on the individual’s age) to $25,000 for all individuals (irrespective of their age).
• Claiming deductions for personal (after-tax) contributions – From 1 July 2017, an individual will generally be able to deduct personal (after-tax) contributions irrespective of their work status (i.e., whether or not they are an employee) and irrespective of the level of any salary income derived during the relevant income year.
• Additional 15% tax liability on contributions for people earning more than $250,000 – From 1 July 2017, individuals earning more than $250,000 will generally be liable to pay an extra 15% tax on deductible contributions (including employer contributions) received by their superannuation fund.
• Extending the tax offset for spouse superannuation contributions – From 1 July 2017, the existing tax offset of $540 (maximum) for spouse contributions will generally be available to a taxpayer who makes superannuation contributions for the benefit of a spouse whose income is less than $40,000 (the existing spouse income threshold is only $13,800).