The ATO has released key changes and new measures to be aware of for your 2018 Income Tax Return. As always, if you need any clarification or more information, contact your advisor at our office on (07) 3862 8777.
Corporate tax rate – base rate entities
From 1 July 2017, companies that are base rate entities will apply the 27.5% corporate tax rate. A company is a base rate entity for 2017–18 if it:
- has an aggregated turnover of less than $25 million
- is carrying on a business.
The company tax rate will remain at 30% for other companies that are not base rate entities.
A company may be a base rate entity to access the lower company tax rate and also be a small business entity to access the small business concessions.
Maximum franking credits
The maximum franking credit that can be allocated to a frankable distribution is based on a company’s applicable corporate tax rate for imputation purposes.
For the 2017–18, a company’s corporate tax rate for imputation purposes may be either 27.5% or 30%, depending on the company’s circumstances.
Expanding accelerated depreciation for small businesses
Small businesses can claim an immediate deduction for assets they first acquire and start to use, or have installed ready for use, up until 30 June 2018, if each depreciable asset costs less than $20,000. This temporarily replaces the previous instant asset write-off threshold of $1,000.
The balance of the general small business pool is also immediately deductible if the balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2018 (including an existing general small business pool).
The ‘lock out’ laws have also been suspended for the simplified depreciation rules until the end of 30 June 2018. The lock-out laws prevent small businesses from re-entering the simplified depreciation regime for five years if they have opted out.
Tax deductions for personal superannuation contributions
Eligibility rules for claiming a deduction for personal superannuation contributions have changed. Previously, only those taxpayers who were primarily self-employed could claim this deduction.
From 1 July 2017, most taxpayers under 75 years old (including those aged 65 to 74 who meet the work test) are able to claim a deduction for personal super contributions regardless of their employment arrangement.
Rental travel deductions – No longer deductable
From 1 July 2017, you are no longer able to claim any deductions for the cost of travel incurred relating to a residential rental property. You may only claim travel deductions if you are carrying on a business of property investing or are an excluded entity.
Income threshold for spouse super contributions tax offset
From 1 July 2017, the income threshold for claiming the tax offset for spouse super contributions increased from $10,800 to $37,000. The maximum tax offset of $540 gradually reduces for income above this level and completely phases out for income above $40,000.
There are also new eligibility rules where taxpayers cannot claim this offset if their spouse who received the contribution either:
- exceeded their non-concessional contributions cap
- had a total super balance of $1.6 million or more at 30 June 2017.
Limiting depreciation deductions on plant and equipment
From 1 July 2017, you cannot claim depreciation of second-hand plant and equipment in rental properties used for residential accommodation. These changes apply to second-hand plant and equipment acquired at or after 7.30pm on 9 May 2017 unless acquired under a contract entered into before this time.
Additionally, taxpayers cannot claim plant and equipment installed on or after 1 July 2017 if they have used it for a private purpose.
Reportable fringe benefits amount
The treatment of reportable fringe benefits amount has changed. This affects the way adjusted taxable income is calculated for tax offsets such as:
- net medical expenses
- dependants (invalid and invalid carer)
- seniors and pensioners
- zone and overseas forces
- low income super.
Learn more here.
Foreign resident capital gains withholding payments
The foreign resident capital gains withholding rate and threshold has changed. It applies to contracts entered into on or after 1 July 2017.
A 12.5% withholding obligation will apply to the disposal of:
- taxable Australian real property with a market value of $750,000 or more
- an indirect Australian real property interest
- an option or right to acquire such property or interest.
Where the vendor of these Australian assets is a foreign resident, the purchaser must pay 12.5% of the purchase price to us as a foreign resident capital gains withholding payment.
A vendor can claim a credit for the foreign resident capital gains withholding payment the purchaser has made to us by lodging a tax return for the relevant year.
Foreign resident capital gains tax
On 9 May 2017, it was announced that Australia’s foreign resident capital gains tax (CGT) regime will be extended to deny foreign tax residents access to the CGT main residence exemption. This change applies from the date of announcement. For properties they held prior to 9 May 2017, they have access to the main residence exemption until 30 June 2019. This change is not yet law.
Following consultation, the Government amended the proposed change to the main residence exemption to ensure that only Australian residents for tax purposes can access the exemption. As a result, temporary tax residents who are Australian tax residents will be unaffected by the change.