Tax Update – November

Client Update - November 2018

Division 7A Changes

Details on the changes to Division 7A (loans to shareholders) has been announced through a consultation paper released by the Treasury and are to apply from 1 July 2019, the key points are as follows:

  • A single 10 year loan will replace the current 7 year and 25 year loans, paid in equal annual instalments and interest rate will be charged at 'Lending rates; Small business; Variable; Other; Overdraft' lending rate instead of the Division 7A Benchmark rate, hence resulting in an increase from 5.20% (FY19) to 8.30%.
  • Pre-1997 loans will not be exempt from Division 7A anymore.
  • Deemed Dividend from Division 7A will not be limited to distributable surplus of the company, ie Retained Earnings.

These amendments have not yet been finalised, and it is possible that there will be changes prior to the introduction of the legislation.

If you think this may have potential impacts to your circumstances, feel free to contact us for any tax planning required.


Foreign residents and main residence exemption

In the 2017-18 Budget, the government announced that foreign residents will no longer be entitled to claim the main residence exemption when they sell property in Australia.

This change is not yet law and is subject to parliamentary process.

The change will apply to foreign residents as follows:

  • for property held prior to 7:30pm (AEST) on 9 May 2017, the exemption will only be able to be claimed for disposals that happen up until 30 June 2019 and only if they meet the requirements for the exemption. For disposals that happen from 1 July 2019 they will no longer be entitled to the main residence exemption
  • for property acquired at or after 7:30pm (AEST) 9 May 2017, the main residence exemption will no longer apply to disposals from that date.

This change will only apply if you are not an Australian resident at the time of the disposal (contract date).


Superannuation Guarantee Amnesty

On 24 May 2018, Minister for Revenue and Financial Services announced the commencement of a 12 month Superannuation Guarantee Amnesty (the Amnesty).

The Amnesty is a one-off opportunity for employers to self-correct past super guarantee (SG) non-compliance without penalty. Subject to the passage of legislation, the Amnesty will be available from 24 May 2018 to 23 May 2019.

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