In his second budget, Scott Morrison has ensured that almost all Australians will pay more tax going forward.

In his second budget, Scott Morrison has ensured that almost all Australians will pay more tax going forward. In addition, he has set his sights firmly on foreign resident investors in an attempt to solve the housing affordability crisis within Australia.

 

The Good

  1. Extending the $20,000 instant asset write off for small business entities with a turnover below the $10m threshold for 12 months until the 30thJune 2018
  2. From 1 July 2018, Australians aged 65 or over will be able to make an additional non-concessional contribution to their superannuation fund of up to $300,000 per person out of the proceeds of the sale of their home that they have owned for 10 years or more. This will be in addition to the current caps and $1.6m balance test
  3. A range of concessions will be made available for resident individuals who elect to invest in qualifying affordable housing
  4. From 1 July 2017, resident individuals will be able to use before tax earnings to contribute up to $15,000 per year (and $30,000 in total) into superannuation to assist with the purchase of their first home. Contributions plus deemed earnings will be taxed at marginal rates on subsequent withdrawal, however a 30% rebate will apply.

The Bad

  1. Increase in the Medicare levy from 2% to 2.5% from the 1stJuly 2019
  2. From 1 July 2017, taxpayers will be unable to claim a tax deduction for travel costs incurred in inspecting, maintaining or collecting rent from a residential rental property
  3. Depreciation deductions for residential properties will be limited to assets actually purchased by the property owner. Importantly, assets purchased and depreciated by a previous owner will not qualify for depreciation deductions. This measure is prospective and will only apply to properties acquired under contracts entered into after 9thMay 2017.
  4. Introduction of integrity measures to eliminate the use of limited recourse borrowing arrangements to circumvent the $1.6m pension cap.

There has also been an obvious crackdown on foreign investors holding Australian residential property:

  1. A charge of up to $5,000 p.a. on foreign owners who keep their property acquired after 9thMay 2017 vacant or unavailable for rent for at least 6 months per year
  2. An increase in the Capital Gains Tax withholding rate from 1stJuly 2017 on disposals of residential properties by foreign residents from 10% to 12.5%
  3. A reduction in the threshold from 1stJuly 2017 for the Capital Gain Tax withholding threshold from $2m to $750,000
  4. Effective 9thMay 2017, integrity measures will be put in place to prevent foreign national circumventing the rules via the use of multiple owners.

If you have any questions regarding the budget and how you may be impacted, please don’t hesitate to contact the Perks Tax Team on 08 8273 9300 or noakes@perks.com.au