Our top tax tips for businesses and individuals ahead of the FY17 year-end
- Drop in company tax rate: The company tax rate is currently 27.5% for companies with aggregate turover of less than $10M. From 1 July 2017 the 27.5% rate will also apply to companies with aggregate turnover of between $10M and $25M. Therefore tax deductions may be available for such companies at the 30% rate to 30 June 2017 and 27.5% thereafter. Accordingly:
- to the extent you can ensure suppliers invoice you prior to 1 July 2017, the deduction will reduce tax at the rate of 30% in FY2017, thereby providing an additional 2.5% reduction in tax;
- review your trade debtors listing and write off all bad debts where appropriate before 30 June 2017;
- review inventory and assets schedules for obsolete items and items that can be scrapped; and
- fully franked dividends declared and paid before 1 July 2017 will carry franking credits at 30%. Thereafter they would be franked at 27.5%.
- $20K instant asset write-off: Businesses that are small business entities (generally those with aggregated turnover of less than $10m) can claim an immediate deduction for assets acquired prior to 1 July 2017 if the cost of the asset is less than $20,000.
- Prepay expenses: Small business entities can prepay up to 12 months’ worth of expenses and claim the full amount in the current year.
- Payment of superannuation contributions: To claim a tax deduction for employee superannuation contributions in the 2017 financial year, the business needs to ensure that the payments have cleared the business bank account by 30 June 2017.
Changes to foreign resident capital gains withholding payments system
On 9 May 2017 as part of the 2017-2018 Federal Budget, the Government announced two changes to the system whereby a purchaser is required to withhold an amount (currently 10%) of the purchase price from the seller and pay the amount withheld to the ATO as part of the settlement process when selling or buying real property or interests in real property in Australia.
The changes announced are to the threshold and the withholding payment rate, and will apply to any contracts of sale entered into on or after 1 July 2017. However, the current threshold and withholding payment tax rate will apply for any contracts which are entered into prior to 1 July 2017, regardless of whether they settle after that date.
NSW Overhauls Property Tax System
New South Wales has announced plans to slash state-based stamp duty for first time buyers and double state-based foreign investor surcharges.
Federal Budget 2017/18: Skilling Australians Fund levy introduced
The Skilling Australians Fund levy was introduced as part of the 2017/2018 budget. This measure has the potential to impact many Australian businesses that employ foreign workers, We encourage you to contact your Walker Wayland NSW advisor if you wish to discuss this or any other aspects of the Budget further.
Businesses that employ foreign workers on certain skilled visas will be required to pay a levy that will provide revenue for a new Skilling Australians Fund from March 2018.
Small business entity turnover increased to $10 million
The Government has announced that it will accept changes made by the Senate to the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016, which implements the Government’s plan to increase the Small Business Entity (“SBE”) turnover from $2m to $10m. These changes will apply from 1 July 2016.
The changes are regarded as a significant benefit to small businesses as they will allow a wider range of businesses to access the benefits afforded to SBE's. As a result, businesses will be able to grow to a greater extent without the loss of the concessions available to a SBE. These changes will immediately benefit taxpayers as they will apply for the 2017 financial year.
It is expected the Bill will be passed by the House of Representatives in the next parliamentary session.
Federal Budget 2017-18: Property purchasers to pay GST to the ATO
Under a proposal contained within the recent 2017-18 Federal Budget, property purchasers rather than property developers must remit the GST directly to the Australian Taxation Office (ATO) as part of the settlement process. This plan to shift the responsibility of accounting for GST from property developers to purchasers will apply to newly-constructed residential properties and new subdivisions from 1 July 2018.
Federal Budget 2017-18
“Practical governments deal with problems and solve them. This is not a budget for ideologues, this is a budget for a government that is doing its job,” the treasurer Scott Morrison said as he handed down his second Budget on Tuesday night, perhaps speaking as much to critics in his own party as to anyone else.
Under measures unveiled by the government on Tuesday night, the Government also imposed a new $6.2bn levy on the big banks, a move that received an early endorsement from the ALP, but that has already met with widespread criticism from the banking sector.
Most Australians will face a 0.5% increase in the Medicare levy in 2018-19, money that will be used to fund the National Disability Insurance Scheme. While conceding that the increase was “an insurance levy on all Australians, pretty much” the Treasurer also said looking after Australians with disabilities was “all our responsibility … and therefore we all have to bear it”. Wealthier workers will bear the greatest burden from the increase in the Medicare Levy, which will see a worker on $100,000 paying $500 more each year.
ATO issues super reform guideline on commutation
The Australian Taxation Office ("ATO") released Practical Compliance Guideline (PCG) 2017/5 on 27 April 2017. This is intended to resolve a practical difficulty facing SMSF members trying to comply with the $1.6m transfer balance cap and is regarded as an important practical means to assist taxpayers to comply with one aspect of the the superannuation reforms.
This guideline explains how SMSF members with pension balances in excess of $1.6m can request a pension commutation effective 30 June 2017, even though the amount of their pension excess is not determined until after 30 June 2017. This will avoid the need for SMSF members to estimate their excess pension balance and commute this amount before 30 June 2017. In effect the ATO is allowing a commutation request without the need to stipulate the amount of the commutation.
The instruction to be provided to the trustees will therefore not need to include a specific amount to be commuted because the amount will not be known at that stage. In those circumstances, if you sign one of these request forms this will constitute complying with the $1.6m cap without the need to physically move any excess amount back to the accumulation phase before 1 July 2017.
The ATO will accept such a request as valid and sufficient if it complies with the guidelines. The request must also be irrevocable and the member must not enter into a similar agreement with any other funds. Further, the request and acceptance to commute must both be made before 1 July 2017.
Please contact us if you would like to discuss this or any aspect of the superannuation reforms.