2017 Budget Summary

Grahame Allen • May 8, 2017

Federal Budget 2017-18 – What it means for you

Highlights

-          Notwithstanding speculation to the contrary, the Temporary Budget Repair Levy (levied at two percent of taxable income in excess of $180,000) will cease on 30 June this year as planned.

-          The $20,000 immediate write-off for small businesses is being extended for one year, to 30 June 2018.

-          The Medicare levy is being increased from 2% to 2.5%, effective from the 2019-20 income year.

-          A number of measures have been announced to reduce the pressure on housing affordability, including:

-           an annual charge on foreign owners of underutilised residential property

-           various CGT changes for foreign investors, including denial of the main residence exemption

-           an option for individuals aged 65 or over to contribute the proceeds of downsizing their home to superannuation

-           denial of deductions for expenses related to inspecting, maintaining or collecting rent for a residential investment property

-           access to a higher CGT discount of 60% (as compared to the 50% available in other circumstances) for investments in qualifying affordable housing

-           the introduction of a first home super saving scheme

 


If you are an individual . . .

who pays tax

. . . you may not have to pay the Medicare levy this year.   From the 2016-17 income year (this year) the Government will increase the Medicare levy low-income threshold for singles to $21,655 (from $21,335), for families to $36,541 (from $36,001), for single seniors and pensioners to $34,244 (from $33,738) and for senior and pensioner families to $47,670 (from $46,966).   The additional amount of threshold for each dependent child or student will also be increased to $3,356 (from $3,306).   This means that you can earn more before triggering a liability to pay the Medicare levy.

. . . if you are required to pay the Medicare levy you will have to pay more from the 2019-20 tax year, as the Medicare levy is being increased from 2% to 2.5%

earning more than $180,000 per annum

. . . you will pay less tax next year.   Notwithstanding speculation to the contrary, the Temporary Budget Repair Levy (an additional two percent on taxable income in excess of $180,000) will cease on 30 June 2017 as planned.   It is not being extended.

who owns a home

. . . if you are aged 65 or over and have owned that home for at least 10 years, from 1 July 2018 you will be able to make a non-concessional (after tax) contribution of up to $300,000 from the proceeds of selling your home. You will be able to do this regardless of the existing age test, work test and soon to be introduced $1.6 million cap on after tax contributions.

. . . if you are a foreign or temporary resident you will not have access to the CGT main residence exemption from 7.30pm on Budget night (although existing properties held prior to this time will be grandfathered until 30 June 2019).

who wants to own a home

. . . you will be able to withdraw on or after 1 July 2018 voluntary superannuation contributions you make from 1 July 2017, along with associated deemed earnings, for a first house deposit.   You will be taxed at your marginal rate, less a 30 percent offset, on concessional (before-tax) contributions you withdraw. You will be able to contribute up $15,000 per year, and up to $30,000 in total.

who is studying

. . . repayments on your Higher Education Loan Programme (HELP) debts will be subject to revised income thresholds - a new minimum threshold of $42,000 will be established with a 1% repayment rate, and a maximum threshold of $119,882 with a 10 per cent repayment rate.

who has a SMSF

. . . the use of limited recourse borrowing arrangements by your fund will be included in your $1.6 million total superannuation balance and transfer balance cap, thereby reducing your scope to make non-concessional contributions from other sources.

. . . you can expect greater focus on the use of related party transactions on non-commercial terms to increase your superannuation savings.

If you invest in residential property . . .

and are a foreign resident

. . . where the property is not occupied or genuinely available on the rental market for at least six months per year, you will be charged an annual 'penalty' of at least $5,000.   The new charge applies to applications to acquire property from 7:30pm Budget night.

. . . you may find yourself barred from buying into a new development, as the Government will introduce a 50% cap on foreign ownership in such developments.

and incur travel expenses related to inspecting, maintaining or collecting rent for the property

. . . from 1 July 2017 you will no longer be able to claim deductions for those expenses.   The cost of engaging a real estate agent for property management services will remain deductible.

that qualifies as 'affordable housing'

. . . on or after 1 January 2018 you will benefit from a higher CGT discount - 60% instead of 50%.   To qualify for the higher discount, housing must be provided to low to moderate income tenants, with rent charged at a discount below the private rental market rate. The affordable housing must be managed through a registered community housing provider and the investment held for a minimum period of three years.

. . . you will be able to access concessional tax treatment by investing in a Managed Investment Trust that itself invests in affordable housing, provided the affordable housing is available for rent for at least ten years.

that contains plant and equipment

. . . you will not be able to claim depreciation deductions for assets purchased after 9 May 2017 by a previous owner of the property.  

that is newly constructed or a new subdivision

. . . on or after 1 July 2018 you will be required to remit GST on the purchase   directly to the ATO as part of settlement, as opposed to the developer being required to remit the GST as is currently the case.

If you are a business . . .

planning to employ foreign workers

. . . from March 2018 you may be required to pay a levy. Businesses will be required to make an upfront payment of $1,200 (for businesses with turnover of less than $10 million) or $1,800 (for businesses with turnover of $10 million or more) per visa per year for each employee on a Temporary Skill Shortage visa, and make a one-off payment of $3,000 (for businesses with turnover of less than $10 million) or $5,000 (for businesses with turnover of $10 million or more) for each employee being sponsored for a permanent Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa.

planning to invest in a depreciating asset or two (or more)

. . . if you are a small business (which you are if your turnover less than $10 million for the year) you will be able to immediately deduct purchases of eligible assets costing less than $20,000 through to 30 June 2018 (initially planned to cease on 30 June 2017).   From 1 July 2018 the immediate deductibility threshold will revert back to $1,000.

in the courier or cleaning industry

. . . the taxable payments reporting system (TPRS) that operates in the building and construction industry will apply to you from 1 July 2018.   You will be required to report payments you make to contractors (individual and total for the year) to the ATO.

and you are intending to dispose of your business, or CGT assets used in your business

. . . your accountant may need to take a second look at whether the small business CGT concessions will be available to you, as the Government is planning to make changes to those rules from 1 July 2017 designed to restrict their availability.

Whoever you are . . .

if you operate in the black economy

. . . your affairs are more likely to be picked up by the ATO, as the Government will be extending the provision of additional funding for ATO audit and compliance programs to better target black economy activities, such as non lodgement, omission of income and non payment of employer obligations.

. . . the Government will act to prohibit the manufacture, distribution, possession, use or sale of electronic point of sale (POS) sales suppression technology and software, which apparently allows businesses to understate their incomes by untraceably deleting selected transactions from electronic records in POS equipment so that income earned from these transactions and tax owing from this income is not reported to the ATO. .

Accessing super from age 60 to 65

By Grahame Allen • August 30, 2024
From 1 July 2024, the rules for accessing superannuation became somewhat simplified: the preservation age when you can begin to access your benefits is now effectively age 60. However, until you reach age 65, there are still potential restrictions on how you can access your super. You’ll need to “retire” before you can make lump sum withdrawals from your super account or move it into the favourable “retirement phase” when investment earnings within the fund become tax-free. If you’re aged between 60 and 65 and wish to access some of your super, now is a good time to re-examine the rules. 60 is the new threshold For anyone born after 30 June 1964, preservation age is simply age 60. You may recall that some members could previously begin to access their superannuation at various stages between 55 and 59 years. Those lower preservation ages applied for older Australians who are now all over 60 and who have already attained their preservation age. Therefore, those rules regarding ages 55 to 59 are no longer an active consideration. How much super can I access? If you are between 60 and 65 years old but haven’t yet retired, you can commence a transition to retirement income stream (TRIS). This allows you to receive a regular income of between 4% and 10% of your pension account balance each year. If you want to access more of your super, or withdraw it as a lump sum, you’ll need to satisfy a further condition of release. This includes: reaching age 65; or “retirement”. Meeting these conditions also becomes relevant for tax purposes. While TRIS payments to a person aged 60 or over are generally tax-free – regardless of whether they are retired or not – the TRIS itself does not move into the “retirement phase” until a further condition such as retirement (or reaching age 65) is met. This means that while you may start a TRIS, the TRIS will not qualify for the tax exemption on the investment earnings from fund assets that support the TRIS until you meet one of those further conditions. What does “retirement” mean? To satisfy the “retirement” condition, the first key requirement is that an arrangement under which you were gainfully employed must have come to an end. If you had already reached age 60 when that position of gainful employment ended, there are no further requirements, and your future work intentions are not relevant. However, if you had not yet reached aged 60 when that position ended, the trustee of your fund must be reasonably satisfied that you intend never to again become gainfully employed, either on a full-time or a part-time basis. For these purposes, “part-time” means working for at least 10 hours per week. This means you could intend to work for less than 10 hours per week and still meet the “retirement” condition. Planning is key Any withdrawal strategy should be carefully planned beforehand to ensure you understand the implications of accessing your super. There are many factors to consider, such as: the ongoing requirement to withdraw minimum pension amounts each year if you start a pension; implications for your transfer balance account; and interaction with the Age Pension. Contact our office if you need help understanding your eligibility for accessing your super, or to begin a discussion about your long-term retirement planning.

Super guarantee a focus area for ATO business debt collection

By Grahame Allen • August 16, 2024
The ATO has revealed its focus areas for this year, with business debt collection identified as a key strategic priority. In its Corporate Plan 2024–25, the ATO says that it will have “an increased focus on business debt including superannuation guarantee, pay as you go withholding and goods and services tax”. This is a timely reminder for all businesses to ensure they’re meeting their obligations. Superannuation guarantee (SG) remains an important compliance focus. The most recent ATO statistics show that although 94% of employers are meeting their SG obligations without ATO intervention, the ATO still raised over $1 billion in SG charge liabilities in the 2022–23 financial year. That figure reflects a lot of extra super liability for Australian businesses that could have been avoided if they had paid the required SG contributions on time. To ensure your business doesn’t incur these extra liabilities, you must pay SG contributions for your employees and eligible contractors on time and to the correct fund. The quarterly due dates are as follows: Q1 (1 July – 30 September): 28 October; Q2 (1 October – 31 December): 28 January; Q3 (1 January – 31 March): 28 April; and Q4 (1 April – 30 June): 28 July. Some important things to remember include: Some contracts and awards may require you to pay contributions more regularly than quarterly. If you make contributions to a commercial “clearing house”, the contribution is considered to be paid when it’s received by the employee’s fund, not by the clearing house. However, if you use the ATO’s Small Business Superannuation Clearing House, the contribution is “paid” when received by that clearing house. From 1 July 2026, employers will need to pay SG at the same time as salary and wages (commonly known as “payday super”). What if my business misses an SG payment? Taking action promptly is essential to accessing the ATO’s support services and minimising your exposure to penalties. The ATO says that it’s willing to work with employers who want to put things right. When you miss a payment, you must lodge an SG charge statement with the ATO within one month of the missed quarterly due date. Lodging on time is important, as failing to do so will incur a further penalty known as a “part 7 penalty”, which can be up to 200% of your SG charge liabilities. Also, when you lodge on time, you may then be able to set up a payment plan to pay your liabilities in instalments. You can ask the ATO for an extension to the lodgement date, but you must do this before the due date. You’ll also need to pay the SG charge. This charge is more than the amount of contributions you would have paid if you had paid them on time, and it’s not deductible. The charge comprises: the amount of the missed contributions (but calculated on salary and wages, including overtime, which is more than the usual “ordinary time earnings” basis for on-time SG contributions); interest of 10% pa (which accrues from the start of the relevant quarter); and an administration fee of $20 per employee, per quarter. This is paid to the ATO, not your employee’s fund. General interest charge will accrue on any outstanding SG charge, and the ATO may also issue a director penalty notice if it remains unpaid. We’re here to help Mistakes happen, but getting on top of problems early will lead to a better outcome for your business. Contact our office for expert assistance in addressing your business’s SG obligations.

Claiming the tax-free threshold: getting it right

By Grahame Allen • August 9, 2024
If you’re an Australian resident for tax purposes, you don’t have to pay income tax on the first $18,200 you earn each year, from any source. This is called the “tax-free threshold”. If you have multiple income sources, it’s important to consider which one you’ll claim it for. The ATO advises claiming the tax-free threshold once from your “main” payer – typically the job, gig or payment that pays you the most during the year. That payer will not withhold income tax from the first $18,200 they pay you but will withhold tax from payments once your earnings go over the threshold. At the end of the financial year, the ATO calculates your total income and tax withheld. If not enough tax has been withheld, you can expect a tax bill. If more tax has been withheld than you owe for your total earnings, you can expect a refund. Claim the tax-free threshold When starting a new job, your employer should ask you to complete a withholding declaration. To claim the tax-free threshold, you must be an Australian resident for tax purposes on the declaration and answer “yes” to the question “Do you want to claim the tax-free threshold from this payer?”. Where you answer “no”, tax will be withheld from all income from that payer. Avoid claiming the threshold from multiple payers simultaneously unless you’re sure you’ll earn less than $18,200 total for the year. Overclaiming might make your take-home pay higher each pay cycle but will likely mean a tax debt later. Changing jobs When changing jobs you can claim the threshold from your new payer even if you have claimed it from your previous one. If you add a job or side gig that will provide more income than your existing main payer, you can change your claim at any time. Altering your tax-free threshold claim Change your claim using ATO online services, via your myGov account: Sign in to myGov and access ATO online services Select Employment from the menu Choose either New employment (for a new job) or Employment details (for an existing employer) Update your tax and super details as needed. Don’t forget your side gig If you’re earning income outside of employment (eg as a sole trader) you’ll need to pay tax yourself on that income. Consider setting aside a percentage for tax or using pay as you go (PAYG) instalments each time you are paid.
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