Residential property GST arrangements
On the 7th of February 2018, a Bill was introduced into Federal Parliament requiring purchasers of new residential premises and new subdivisions of potential residential land to remit the GST on the purchase price directly to the ATO as part of the settlement process. Under the current law, the supplier of the property (eg the developer) is responsible for remitting the GST to the ATO upon lodging a business activity statement (BAS) up to three months after settlement.
When the Bill is passed, GST withholding by purchasers will commence on 1 July 2018. There is a two-year transition window for contracts that were executed before that date and will settle before 1 July 2020. After that date, GST withholding will apply to all residential sales.
The withholding amount is 1/11th of the contract price for fully taxable sales (reduced to 7% for margin scheme sales). Settlement adjustments are ignored and the withholding is based on the stated contract price only.
Purchasers will have two options in relation to the withheld GST:
- remit it to the ATO on or before settlement; or
- give the vendor a bank cheque on settlement (made out to the ATO).
All vendors of residential premises/residential land (including developers, investors and private home owners) will need to provide a notice to the purchaser before settlement advising whether GST withholding applies. Failure to do so will be a strict liability offence, attracting a fine of $21,000 for individuals and $105,000 for companies.
At the time of writing, the Treasury Laws Amendment (2018 Measures No. 1) Bill 2018 is before the House of Representatives.
Single Touch Payroll reporting starts on 1 July for employers with 20 or more employees
Single Touch Payroll is a reporting change for employers.
It starts from 1 July 2018 for employers with 20 or more employees.
You will report payments such as salaries and wages, pay as you go (PAYG) withholding and superannuation information from your payroll solution each time you pay your employees.
Single Touch Payroll will be expanded to include employers with 19 or less employees from 1 July 2019. This is subject to legislation being passed in parliament.
Residential rental properties – depreciation
Changes announced as part of the 9th May 2017 federal budget have now been legislated after being passed by the Senate on the 15th of November 2017.
From 1 July 2017, unless you are carrying on a business of property investing or are an excluded entity, you cannot claim for depreciation of second-hand plant and equipment in rental premises used for residential accommodation.
These changes apply to second-hand plant and equipment you acquired at or after 7.30 pm (AEST) on 9 May 2017 unless you acquired them under a contract entered into before this time. Additionally, you cannot claim for plant and equipment installed on or after 1 July 2017 if you have ever used it for a private purpose.
ATO Clearance Certificate Required for Property Sales
New rules apply to Australian resident vendors disposing of certain taxable property under contracts entered into from 1 July 2017.
The entity that has legal title to the asset, is the entity required to obtain an ATO clearance certificate. Each vendor must lodge their own application. Vendors who are parties to the same property transaction are not able to lodge joint applications.
Australian resident vendors will need to obtain a clearance certificate from the ATO, prior to settlement, to avoid an amount (12.5%) being withheld by the purchaser. The vendor will have to provide the purchaser with an ATO issued clearance certificate on or before the day of settlement to ensure no withholding occurs.
Cars and tax
From 1 July 2017 the following car threshold amounts apply.
There's an upper limit on the cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). You use the car limit that applies to the year you first use or lease the car.
The car limit for 2017–18 is $57,581.
Goods and services tax (GST)
Generally, if you purchase a car and the price is more than the car limit, the maximum amount of GST credit you can claim is one-eleventh of the car limit amount.
You can't claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.
Luxury car tax
From 1 July 2017 the luxury car tax threshold for luxury cars increased to $65,094.
The threshold for fuel efficient luxury cars for the 2017–18 financial year remains at $75,526.
In general, the value of a car includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.
From 1 July 2017, GST reporting on the business activity statement (BAS) will become easier with Simpler BAS.
All businesses with an annual turnover of less than $10 million will be automatically moved to simpler BAS.
If your turnover is below this amount, you’ll only need to report:
G1 – Total Sales
1A – GST on Sales
1B – GST on Purchases
Superannuation changes from 1st July 2017
ARE YOU MAKING CONTRIBUTIONS
The concessional contributions cap is $25,000 for everyone. Previously, it was $35,000 for people 49 years and older at the end of the previous financial year and $30,000 for everyone else.
The annual non-concessional contribution cap will be reduced from $180,000 to $100,000 per year. This will remain available to individuals aged between 65 and 74 years old if they meet the work test.
Your non-concessional cap will be nil for a financial year if you have a total superannuation balance greater than or equal to the general transfer balance cap ($1.6 million in 2017–18) at the end of 30 June of the previous financial year. In this case, if you make non-concessional contributions in that year, they will be excess non-concessional contributions.
If you are under 65 years, you may make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year by bringing forward your non-concessional contributions cap for a two- or three-year period.
In 2016–17, an individual (mainly those who are self-em
ployed) can claim a deduction for personal super contributions where they meet certain conditions. One of these conditions is that less than 10% of their income is from salary and wages. This is known as the 10% maximum earnings condition.
From 1 July 2017, the 10% maximum earnings condition will be removed. This means most people under 75 years old will be able to claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test).
ARE YOU APPROACHING RETIREMENT
The government will remove the tax-exempt status of earnings from assets that support a transition to retirement income stream (TRIS). Earnings from assets supporting a TRIS will be taxed at 15% regardless of the date the TRIS commenced.
ARE YOU RETIRED
There is a limit on how much of your super you can transfer from your accumulation super account(s) to tax-free ‘retirement phase’ account(s) to receive your pension income.
This limit is known as the ‘transfer balance cap’. The cap relates to the amount you transfer and hold in retirement phase accounts. There is no limit on the amount of money you can have in your accumulation super account(s).
The transfer balance cap will start at $1.6 million, and will be indexed in line with the consumer price index (CPI), rounded down to the nearest $100,000.
DO YOU EARN MORE THAN $250,000
Currently, individuals with income and concessional super contributions greater than $300,000 will trigger a Division 293 assessment.
From 1 July 2017, the government will lower the Division 293 income threshold to $250,000. An individual with income, and concessional super contributions, exceeding the $250,000 threshold will have an additional 15% tax imposed on the lesser of:
• the excess, or
• the concessional contributions (except excess contributions).
Extending the immediate deductibility threshold for small business
On 9 May 2017, the Government announced an extension to the 2015-16 Budget measure providing an instant asset write-off provision for small business.
Small businesses (those with an aggregated turnover of less than $10m from 1 July 2016) can immediately deduct the business portion of most assets if they cost less than $20,000 (this is exclusive of GST if your business is registered for GST) and were purchased between 7:30PM on 12 May 2015 and 30 June 2018.
This deduction can be used for each asset that costs less than $20,000, whether new or second-hand. You can claim the deduction in the year the asset was first used or installed ready for use.
These depreciation rules will continue to apply until 30 June 2018.
Reducing the corporate tax rate
In the 2016–17 Budget, the Government announced that it intended to progressively reduce the corporate tax rate from 30 per cent to 25 per cent. These changes were outlined in the Enterprise Tax Plan 2016 Bill. Amendments were made to this Bill by the Senate on 31 March 2017. The amendments were accepted by the Government and received Royal Assent on 19 May 2017.
Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 was introduced to the House of Representatives on 11 May 2017 to increase the scope of which corporate entities would be eligible for the lower corporate tax rate in future years.
Enterprise Tax Plan 2016
The corporate tax rate is reduced from 28.5% to 27.5% for the 2016–17 income year for small business entities. The aggregated turnover threshold to qualify as a small business has been increased from $2 million to $10 million.
In 2017–18 the threshold increases from $10 million to $25 million and in 2018–19 to $50 million. From 2017–18, corporate entities eligible for the lower tax rate will be known as base rate entities, i.e. the small business definition will remain at $10 million from 2017–18 onwards while the base rate entity threshold will continue to rise.
2017-2018 Victorian State Budget
The Victorian Treasurer handed down the 2017-2018 Budget in May 2017.
Here is a summary of some of the changes:
- From 1 July 2017, property transfers between spouses and de facto partners involving commercial and/or investment properties (that is, assets that do not constitute a principal place of residence) will no longer be exempt from transfer stamp duty.
- From the 2017 calendar year, vacant residential property tax of 1% of the property’s capital improved value to be applied to properties in certain local council areas of Melbourne that are left unoccupied for six months or more in a calendar year.
- Land tax valuations by the Valuer-General to be undertaken annually instead of every two years.
- From 1 July 2018, the current payroll tax threshold of $575,000 will be increased to $650,000. The threshold under which businesses can opt to make annual payroll tax payments, rather than monthly payments, will increase from annual payroll tax liabilities of $10,000 to $40,000.
- From 1 July 2017, the rate of duty for new passenger vehicle purchases will increase from $6.40 per $200 or part thereof (3.2%) to $8.40 per $200 or part thereof (4.2%), on the dutiable value of vehicles that do not exceed the luxury car threshold.
Personal middle income tax rate cut on the way
The Federal Government has introduced a Bill which proposes to implement its 2016 Budget proposal to increase the third personal income tax threshold that applies to personal income taxpayers. The rate of tax payable on individuals’ taxable incomes from $80,001 to $87,000 would fall from 37% to 32.5%.
Shortly following the Bill’s introduction in Parliament, the ATO issued new PAYG withholding tax schedules that reflect the lowered personal tax rate in the Bill. Effective from 1 October 2016, employers will be required to lower the amount of tax withheld for affected taxpayers to factor in the new lower tax rate. Any tax overpaid beforehand will be refunded by the ATO on assessment after the end of the 2016–2017 financial year.
ATO Data matching real property transactions
The ATO has gazetted a notice specifying that it will acquire details of real property transactions for the period 20 September 1985 to 30 June 2017 from various State Revenue offices and tenancies boards. Information to be obtained will include: rental bond number of identifier for rental bond; unique identifier for the landlord; full name of the landlord; full address of the landlord; period of lease; date of property transfer; property sale contract date; settlement date; and valuation details.
The ATO expects that around 31 million records for each year will be obtained. Based on current data holdings, the ATO estimates that records relating to 11.3 million individuals will be matched. The purpose of this data matching program is to ensure that taxpayers are correctly meeting taxation and other obligations administered by the ATO in relation to their dealings with real property. These obligations include registration, lodgement, reporting and payment responsibilities.
Note that the ATO intends to continue this data matching program from 2017. In the 2013–2014 Federal Budget, the Government announced that it would legislate to make the reporting of real property transfers to the ATO mandatory in the future. The current Government confirmed that it would proceed with this proposal. Amending legislation to implement the proposal is contained within the Tax and Superannuation Laws Amendment (2015 Measures No 5) Act 2015.
Helping Taxpayers Get it Right this Tax time on Rental Properties
This tax time the ATO is increasing its focus on rental property deductions and is encouraging all rental owners to double-check their claims before lodging their tax return.
We are paying particular attention to excessive deductions claimed for rental properties, especially those located in popular holiday destinations around Australia.
There are a few simple rules rental property owners should follow to avoid making mistakes on their tax return.
Firstly - it is important for all property owners to keep accurate records. This helps to ensure they declare the right amount of rental income and they have evidence for claims made.
Secondly - rental property owners should only claim deductions for the periods the property is rented out or is genuinely available for rent. If a property is rented at below market rates, for example to family or friends, deduction claims must be limited to the income earned while rented.
Australian Tax Office Warning about Phone Scams
The ATO Media Release update on the 20th of August 2015
The ATO issued a Media Release titled Protect yourself again phone scammers, which warns the public of aggressive phone scammers, who attempt to force people to pay a fake tax debt over the phone by threatening arrest if they don’t comply. This information is then used or sold to other criminals to commit identity fraud. This can happen immediately or even months or years later.
It is important clients are aware that scammers try to collect personal information to steal their identity, including:
- tax file numbers
- dates of birth
- myGov user name and password
- bank account and credit card details
- Drivers licence, Medicare and passport details.
The Assistant Commissioner said that the ATO would never contact taxpayers in a threatening manner compelling them to pay a tax debt with threaten jail or arrest and does not email, call or SMS asking for credit card or bank details to issue a refund. They may tell clients that there is a warrant out for their arrest or offer to send a taxi to take them to a post office so that they can make a payment.
The ATO has urged taxpayers to protect their personal details.
Taxpayers who receive a phone call from the ATO are concerned about providing their personal details over the phone should request the caller’s name and phone back them back through the ATO’S switchboard on 13 28 69.