Federal Budget – Non Superannuation Measures

The superannuation measures in the budget are covered in a separate article, but below is a summary of some of the other budget announcements that might be of interest.

$20,000 instant Asset Write-Off extended

The ability for small businesses (ie with aggregated turnover of less than $10 million) to claim an instant write-off for purchases of plant and equipment costing less than $20,000 was due to end on 30 June 2017, but has been extended for a further year.

Medicare Levy to Increase

From 1 July 2019 the medicare levy will increase from 2% to 2.5%. The 0.5% increase is to ensure that the National Disability Insurance Scheme is fully funded.

HELP Debt Repayments

From 1 July 2019, it is proposed that the threshold from which you are required to repay your Higher Education Loan Program (HELP) debt will reduce from $55,874 down to $42,000. The minimum repayment rate will be 1% of taxable income, up to a maximum of 9.5% for those with taxable incomes above $100,655.

GST on New Residential Property

Under current law, GST is included in the purchase price of new residential property, and the developer reports and remits it as part of its normal Business Activity Statement. From 1 July 2018, purchasers of newly constructed residential properties will be required to remit the GST on their purchase directly to the ATO as part of settlement.

The measure is designed to overcome situations where property developers fail to remit GST.

Deductions for Residential Rental Properties Reduced

New measures are to be introduced to restrict residential rental property deductions in relation to:

Travel Expenses

From 1 July 2017, deductions for travel expenses related to inspecting, maintaining or collecting rent for residential rental properties will no longer be allowed.

Depreciation

For residential investment properties acquired under contracts entered into after 7.30pm (AEST) on 9 May 2017, deductions will not be allowed for depreciation on plant and equipment purchased by the previous owner of the property. In other words, investors will no longer be allowed to claim depreciation deductions on things like air conditioners, dishwashers and hot water systems that were already in a property when they purchased it.

Investors who purchase plant and equipment themselves for their investment property will be allowed to claim depreciation on these purchases.

Foreign & Temporary Residents – Main Residence Exemption

Currently, under the right circumstances, foreign and temporary residents can use the absence rule in the CGT main residence exemption provisions to claim the main residence exemption on an Australian property even if they’re no longer residing in the property. The absence rule can apply for up to six years if the property is rented out, or indefinitely if they aren’t earning rent from the property.

This exemption will no longer apply to foreign or temporary residents.

Any capital gains on properties that were already owned at 7.30pm on 9 May 2017 will continue to be exempt from CGT for these taxpayers until 30 June 2019, so affected taxpayers should carefully consider whether they should sell their property before then. While it is not actually law yet, if the legislation goes through as suggested then the above will be the effect.