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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
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{89774503f1dc5a8067a215bf11c503ad6eecdd9fbdfb7beae4875fba6258e357} to 60{89774503f1dc5a8067a215bf11c503ad6eecdd9fbdfb7beae4875fba6258e357}. This increased discount will also apply to eligible Managed Investment Trusts (MITs) as of 1 July 2017.What this could mean for youThe 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.
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 youIf 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
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 youIf 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{89774503f1dc5a8067a215bf11c503ad6eecdd9fbdfb7beae4875fba6258e357} to 12.5{89774503f1dc5a8067a215bf11c503ad6eecdd9fbdfb7beae4875fba6258e357}.This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this fact sheet can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.