14 Feb iAdvice Tax update
Years ending with a big rush where everyone is racing to get things done before Christmas and a lot of worries are still on the mind are usually followed with a slower start in the new year generally not being active till about the third week in January when the kids are preparing to return to school.
Other years are the opposite if business was slow leading up to Christmas, then the new year starts fast and furious.
For us last year finished with a lot still on the mind and the new year started very early with clients needing support instantly .. Welcome back
With elections on the horizon for Australia the unusually hot summer seems to be affecting the mind.
With a likely Labor win in the federal election in May, in the midst of a slowing property market and a credit squeeze by lenders, property investors are worried.
What are they worried about? Well .. how about Cash Flow including
interest only loan – no re-financing or higher interest rates
increasing cash needs for principal & interest payments,
oversupply forcing rents down or limiting increases
land tax based on land valuation when land was at its highest
limited opportunities for borrowing by self managed super funds purchasing property
rising living costs including energy, education etc.
impact of the Hayne Royal Commission on the Banking industry
ATO chasing hard – every dollar with a arisk of penalty for delayed payments and lodgements
How is the pressure to be relieved?
work longer hours, the partner to go out to work
sell one property from the portfolio – But which one
– the last one
– the first one
– the one with least CG
– the one with most debt or
– downsize the McHome?
For those investors who have either exited on high values, have cash bonuses or savings or equity in their homes, what are they to do with a sliding residential property market at least on the Eastern Seaboard?
Is it time for having a closer look at a Commercial Property, with its promise of positive cash flows, tenant covering outgoings and an economy performing reasonably?
Top Tax Changes for 2018/2019
With all the excitement, to keep you ahead of the game below are some of the tax and other changes scheduled to operate from the 2018/2019 tax year.
The individual income tax rate thresholds will be progressively increased under a seven-year Personal Income Tax Plan beginning from 2018/19.
A low and middle income tax offset is available for the 2018/19, 2019/20, 2020/21 and 2021/22 income years.
Individuals with superannuation account balances of $500,000 or less can make “catch-up” superannuation contributions using their unused concessional contributions caps (for up to five years) from 1 July 2018.
Individuals aged 65 years or older can make downsizer contributions of up to $300,000 into their superannuation using the proceeds from the sale of their main residence where sale contracts are exchanged on or after 1 July 2018 (and superannuation providers can accept such contributions).
The car expenses cents per kilometer rate is increased from 66 cents to 68 cents for 2018/19.
A new Child Care Subsidy is available from 2 July 2018 to support families where both parents work.
The maximum voluntary excess levels for hospital cover products providing individuals an exemption from the Medicare levy surcharge will increase from 2018/19.
Companies And Small Business
The lower corporate tax rate of 27.5% applies for qualifying companies that have an aggregated turnover of less than $50m for 2018/19 and have no more than 80% of their assessable income consisting of “base rate entity passive income”.
Tax Tip – that means rental property only companies are still taxed at 30% rate
The immediate write off for assets costing less than $20,000 by small business entities has been extended to 30 June 2019.
Tax Tip – This is good
With effect from 8 May 2018, an additional basic condition will apply in relation to the CGT small business concessions where the CGT event involves a partnership interest to prevent the concessions from being available for Everett assignments.
A new regime for limited partnership collective investment vehicles is proposed to operate from 1 July 2018.
Venture capital tax concessions are available for investments in financial technology businesses (“fintech”) made on or after 1 July 2018.
Legislation has been introduced to reform the R&D tax incentive for income years starting on or after 1 July 2018.
Legislation has been introduced that will amend the calculation of balancing adjustment amounts for R&D assets from 1 July 2018.
From 19 August 2018, primary producers can claim an immediate deduction for capital expenditure on fodder storage assets.Goods & Services Tax
Good & Services Tax
Purchasers of newly constructed residential premises or new subdivisions are required to remit GST directly to the ATO from 1 July 2018.
Offshore supplies of low value goods to a consumer will be treated as being connected with Australia, and therefore may be subject to GST from 1 July 2018.
The luxury car tax on cars re-imported into Australia, following a refurbishment overseas, will be removed from 1 January 2019.
From 1 July 2018, non-arm’s length expenditure is proposed to be taken into account when determining whether the non-arm’s length income taxation rules apply to a transaction.
A fund member’s share of the outstanding balance of a limited recourse borrowing arrangement that commenced on or after 1 July 2018 is proposed to be included in their total superannuation balance in certain circumstances.
The release authority regime governing the release of superannuation money following the issue of an excess concessional or non-concessional contributions determination, or an FHSS determination, or an assessment of Division 293 tax will come into effect from 1 July 2018.
Proposed amendments will give employees under workplace determinations or enterprise agreements made on or after 1 July 2018 the right to choose their superannuation fund under the choice rules, and provide that amounts sacrificed under an employee salary sacrifice arrangement cannot reduce an employer’s mandated SG contributions.
A one-off 12-month amnesty period is proposed from 24 May 2018 to 23 May 2019 to encourage employers to self correct historical SG non-compliance, and allow employees receiving superannuation contributions from multiple employers to apply to the Commissioner to opt out of the regime in respect of an employer.
Rules on director penalties and security deposits for tax-related liabilities will be strengthened.
The Single Touch Payroll reporting framework starts on 1 July 2018 for substantial employers – more than 20 employees
New offences have been introduced to deter the production, use and distribution of electronic sales suppression tools from 4 October 2018.
From 1 July 2018, the taxable payments reporting system will be extended to contractors in the courier and cleaning industries.
Australia has signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The measures in the MLI will enter into force for Australia on 1 January 2019
From 1 July 2018, purchasers of certain new residential real property must withhold an amount equivalent to the GST from the contract price.
The ATO will apply penalty relief to inadvertent errors in tax returns and activity statements made by eligible taxpayers that are due to failing to take reasonable care or taking a position on income tax that is not reasonably arguable from 1 July 2018.