Articles

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.

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“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.

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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.

On Friday 31 March 2017 the Government struck a deal with the Senate crossbench to pass the reduction of the company tax rate to 25% over 10 years. In the event what was passed was a much watered-down version of what was previously intended to be the Government’s key economic policy initiative.

Under the deal reached, small and medium businesses will benefit as:

  • the company tax rate reduces to 25% over the 10 year period; and
  • the turnover threshold increases so that more company businesses can access the lower tax rate.

The standard company tax rate will remain at 30% for companies with an annual turnover in excess of the small/medium business turnover cap.

Dividend franking

There will be no changes to the application of the dividend imputation provisions as the standard corporate tax rate will remain at 30%. Large companies will continue to frank dividends at 30%, as will small and medium businesses, notwithstanding they pay company tax at the lower rate.

Unincorporated small/medium businesses

There will be an increase in the rate used to calculate the small business tax offset for unincorporated small/medium businesses. But the offset will remain capped at $1,000, so the offset will continue to be of limited practical effect; certainly not as advantageous as the small/medium business company tax cuts.

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The Australian Taxation Office released a final version of Law Companion Guideline LCG 2016/12 on 20 March 2017. This addresses how an individual's total superannuation balance will be calculated from 30 June 2017. The guideline was previously issued in draft as LCG 2016/D12.

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The recent changes to superannuation will have a variety of impacts on members of superannuation funds depending on their individual circumstances. For fund members who are receiving Transition to Retirement Pensions (TTRs) in particular, the tax advantage on the earnings within a TTR pension will be removed from 1 July 2017.

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 The Impact on you of the Upcoming Superannuation Changes

The superannuation changes, which take effect on 1 July 2017 will affect both concessional and non-concessional superannuation contribution options and could have a substantial impact on workers, who may end up paying more tax, particularly the wealthy.

Therefore, you may need to take action prior to 1 July 2017 to ensure you take advantage of advantages that still exit to ensure you are better placed to face retirement.

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The ATO has now finalised its Law Companion Guideline LCG 2016/8 Superannuation reform: transfer balance cap and transition-to-retirement reforms: transitional CGT relief for superannuation funds addressing the contentious issue of the potential CGT implications of the new rules rule limiting superannuation balances to $1.6 million per member from 1 July 2017. Having published a draft guidline in November 2016 this is the consolidated guideline and is intended to provide clarity around the issue of CGT for transition to retirement income.

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