Checklist of Top Tax Changes in 2018
Small businesses and companies
- From 1 July 2017, the concessional corporate tax rate of 27.5% will only be available for “base rate entities”, being entities with no more than 80% of its income being “base rate entity passive income”.
- The ATO will be allowed to disclose to redit 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 applies to small business entities from 1 July 2017
- 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
- 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; excess transfer balance tax is payable for exceeding the cap
- 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 dependants, has been removed from 1 July 2017
- Transitional CGT relief applied 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.
- 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.
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)
- A 60% discount is proposed to be available from 1 January 2018 for a resident individual from investments, either directly or indirectly through certain trusts in qualifying affordable housing
- The principal asset test will be applied on an associate inclusive basis for foreign tax residents with indirect interests in Australian real property from 7.30 pm (AEST) 9 May 2017
- 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 has been 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.
- Managed investment trusts will be allowed to invest in affordable housing from 1 July 2017
- From 1 July 2017, travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed
- From 1 July 2017, travel expenses related to inspecting, maintaining or collecting rent for a residential rental property are not deductible
- Eligibility for deductions for second-hand depreciating plant and equipment in a residential rental property will be limited for certain types of taxpayers. Generally, only the entity that actually incurred the outlay to purchase the plant and equipment can claim the deduction and not successive investors in the property, from 1 July 2017
- From 1 July 2017, the Commissioner will limit a taxpayer’s PAYG instalment rate in cases where the normal rules would otherwise produce a very high rate
- Primary producers are allowed to access income tax averaging 10 income years after choosing to opt out, instead of that choice being permanent from 2016/17
- The junior mineral exploration tax credit (JMETC) will replace the exploration development incentive (EDI)Â from 2017/18
- Foreign owners of residential real estate are liable to pay a vacancy fee where a residential property is not occupied or genuinely available on the rental market for at least six months in a 12-month period. The fee applies to applications to acquire a residential dwelling or land from 7.30 pm (AEST) on 9 May 2017
- From 1 January 2018, residential properties in metropolitan Melbourne that are left vacant for six months in the calendar year will be subject to a Vacant Residential Property Tax at a rate of 1% of the property’s capital improved value
- For 2017/18 a new Queensland absentee surcharge applies at the rate of 1.5% of the taxable value of land in excess of $349,999.
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