Tax Update – October

Client Update - October 2017

Vacancy levy on foreigners who owns residential properties

A vacancy levy has been introduced, effective from 9 May 2017, to target foreigners who owns residential properties but were not rented out or available for rental in the market for more than 6 months in a calendar year.

 

ATO targeting ‘Cash Only’ businesses  

The ATO is currently implementing counter measures in combatting people and businesses that do not meet their tax obligations.

With the usage of various tools, the ATO is able to data match and collect information such as from banks, other government agencies, information on motor vehicle and property purchases and compare these expenditures with the income reported to the ATO to identify any unrealistic discrepancies.

 

Removal of 10% rule to personal contributions  

In the past, the “10% rule” applies to individuals, who receives both employment income and income from self-employment or investment, to claim tax deductions on their personal contributions to their Superfund.

The “10% rule” is where an individual’s income from employment must be smaller than 10% of their total income (ie. income generated from sole trader or investment).

However, this 10% rule have been removed for the financial year ending 30 June 2018, meaning all individuals below 75 years of age are able to claim tax deductions for their personal contributions to their Superfund account, including individuals who are both employed and self-employed.

There is no indication how long this change will last. So, it’s opportune to take advantage of this in the current financial year.

 

Lowering of threshold for high income earners super contribution tax  

From 1 July 2017, individuals are liable to pay extra tax (Division 293 assessment) if their income and concessional super contributions are more than $250,000 (previously $300,000).

The determination of Division 293 assessment is 15% of the lower of excess aggregated income over 250,000 or concessional contributions (except excess contributions).  

  Scenario 1

  Income of $260,000
  Concessional Contribution of $5,000

As the aggregated income is $265,000, it is $15,000 over the threshold.
Thus, the Division 293 assessment is 15% of the lower of $15,000 ($2,250) or $5,000 ($750), the individual will receive a division 293 assessment on the $5,000.

  Scenario 2

  Income of $240,000
  Concessional Contribution of $25,000

As the aggregated income is $265,000, it is $15,000 over the threshold.
Thus, the Division 293 assessment is 15% of the lower of $15,000 ($2,250) or $25,000 ($3,750), the individual will receive a division 293 assessment on the $15,000.

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