Federal Budget 2017: Tax (investors)

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10 May, 2017 by Tony Sarai Tony Sarai // Financial Planning

This article is published by Modoras Pty Ltd

Tax investors for screen paddingFederal Budget 2017: Tax (investors)

Please note that each of these proposals will only become law if it is passed by Parliament.
– Incentives for investment in affordable housing
– Restrictions on deductions for residential property investments
– Tax changes for foreign tax residents and property owners

Incentives for investment in affordable housing

From 1 January 2018, resident individuals who invest in qualifying affordable housing will be eligible for an increase in the capital gains tax (CGT) discount from 50% to 60%. This increased discount will also apply to eligible Managed Investment Trusts (MITs) as of 1 July 2017.

What this could mean for you

The increased levy may also result in increases to many tax rates linked to the top personal tax rate, including fringe benefit tax and excess non-concessional contributions tax. Certain lump sum super payments that attract the levy may also be impacted, such as disability benefits paid to people under preservation age.


Restrictions on deductions for residential property investments

From 1 July 2017, depreciation deductions for residential plant and equipment (e.g. dishwashers and ceiling fans) will be limited to investors who actually made the purchase, not subsequent owners. Also from that date, investors will be unable to deduct travel expenses related to inspecting, maintaining or collecting rent for  a residential rental property. The changes will apply to any item purchased after budget night. Existing depreciation deductions on plant and equipment will be grandfathered.

What this could mean for you

If you’re a subsequent investor in a property, the acquisition of existing plant and equipment will be reflected in the cost base for CGT purposes. Grandfathering applies to plant and equipment that forms part of a residential investment property as at 9 May 2017 and will continue to give rise to depreciation deductions under current rules. The new rule around travel expense deductions applies to all property investors, including SMSFs, family trusts and companies


Tax changes for foreign tax residents and property owners

Foreign or temporary tax residents will no longer have access to the CGT main residence exemption on properties acquired after 7.30pm AEST on Budget night (9 May 2017). Also from Budget night, foreign owners of residential property that is not occupied or genuinely available on the rental market for at least six months per year will be subject to an annual levy of at least $5,000.

What this could mean for you

If you’re a foreign of temporary tax resident and you held an existing property before Budget night, the property will be grandfathered and you’ll be able to continue claiming the CGT main residence exemption until 30 June 2019. However, from 1 July 2017, the CGT withholding rate that applies to foreign tax residents will increase 10% to 12.5%.

This article is published by Modoras Pty Ltd ABN 86068034908 AFS and Credit License No. 233209. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.


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