There were a few leaks, and a few surprises in last night's Federal budget. Here are some of the relevant tax proposals that could affect you...
Medicare levy to increase to 2.5% from 1 July 2019. It is expected that the top marginal tax rate will be 47.5% (with the removal of the 2% Temporary Budget Repair Levy) Small business instant asset write-off extended until 30 June 2018 for business assets under $20K, and small business turnover threshold test increased from $2M to $10M. First home savers can now salary sacrifice into superannuation from 1 July 2017
Contributions will be taxed concessionally at 15% on these savings and they will be able to then withdraw these funds for a first home purchase. Existing super accounts can be used but existing balances will not be accessible. Contributions will be capped at $15K per year, $30K all up
An individual would save around $4,500 tax if they contribute $30K into super under this scheme (based on an average 30% tax rate). Will this be enough to secure a property in this market?
Rental property travel expense claims Deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed from 1 July 2017. All normal rental expenses will remain deductible.
The ATO has become increasingly concerned about travel claims that haven't correctly apportioned costs, or are private in nature e.g. joint holiday / inspection trips.
Rental property Depreciation
Plant and equipment depreciation deductions will be limited to amounts actually by investors in residential real estate properties from 1 July 2017. Super contributions from sale of main residence introduced for retirees. From 1 July 2018 people over 65 can make a non-concessional super contribution of up to $300K from the sale of their main residence. Couples can contribute $300K each on the sale of the same property. They must have owned their principal residence for at least 10 years
This allows retirees over 65 to recontribute into super, even if they have over the new $1.6m balance cap.
HELP (Higher Education Loan Program) repayment threshold lowered to $42K p.a., and repayment rates increased to 10% for those earning over $120K Courier and cleaning businesses will join the construction industry and be required to lodge a Taxable Payment Report from 1 July 2018 Foreign investors no longer able to access main residence exemption. Starts from budget night but grandfathered for existing properties until 30 June 2019 Foreign investors capital gains withholding increased to 12.5% for non-residents from 1 July 2017 Foreign worker levy of $1,200 per year plus $3,000 upfront for small businesses will be imposed
Please call or email us to discuss how these changes will affect you..