Company tax rate cut for small businesses from 1 July 2016 from 30% to 27.5%
For the 2016–17 income year, the company tax rate for small businesses decreases to 27.5% for companies with aggregated turnover less than $10 million.
- For companies with turnover less than $25m the rate will reduce to 27.5% in 2017-18
- For Companies with turnover less than $50m the rate will decrease to 27.5% in 2018-19.
Expanded access to small business concessions from 1 July 2016
From 1 July 2016, a range of small business tax concessions became available to all businesses with turnover less than $10 million (the turnover threshold) (increased from $2 million). The turnover threshold stays at $2m for Capital Gains Tax Small Business concessions)
Changes to backpacker tax from 1 January 2017
On 1 January 2017, tax rates changed for working holiday makers who are in Australia on a 417 or 462 visa. If you employ a working holiday maker on a 417 or 462 visa you must register with ATO.
- You should withhold 15% from every dollar earned up to $37,000 with foreign resident tax rates applying from $37,001.
- If you don’t register you need to withhold at the foreign resident tax rate of 32.5% from the first dollar earned.
Non-concessional contributions cap reduced from 1 July 2017 from $180,000 to $100,000 per year
Non-concessional (after-tax) contributions include:
- personal contributions for which you do not claim an income tax deduction, and
- spouse contributions.
This reduction will remain available to individuals aged between 65 and 74 years old if they meet the work test.
There is an opportunity to transfer a non-concessional contribution up to the maximum of up to $540,000 to concessionally taxed super if the brought forward arrangement has not been triggered before 1 July 2017.
If you are under 65 years, you may make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year by bringing forward your non-concessional contributions cap for a two or three year period. If eligible, when you make contributions greater than the annual cap, you automatically gain access to future year caps. This is known as the “bring forward” arrangement. For eg for 2016-2017 year, instead of transferring $180,000 for one year, you can transfer a total of $540,000 for 3 years in one go if prior 2 years cap unused.
From 1 July 2017, the non-concessional contributions cap amount that you can bring forward, and whether you have a two or three year bring forward period, will depend on your super balance at the end of 30 June of the previous financial year. For eg if you have a balance of less than $1.4million, you may be entitled to the maximum of 3 years ($300,000 brought forward non-concessional contribution in 2017-18 year).
The remaining cap for years two or three of a bring forward arrangement is reduced to nil for a financial year if your total super balance is greater than or equal to the general transfer cap (see below) at the end of 30 June of the previous financial year. For eg if your super balance is $1.6million at 30 June 2017 you are not entitled to brought forward period for 2017-18 year as the non-concessional cap applies.
Note that your maximum bring-forward amount in 2016-17 has not changed. It is still $540,000 if you have not triggered the bring-forward rules in 2014-15 or 2015-16.
Change to personal super contributions deductions from 1 July 2017 – $25,000 concessional contribution cap
- These changes are for people who make personal super contributions from their income after tax (this does not include contributions made under a salary sacrifice arrangement and compulsory super paid by your employer), and
- want to claim a deduction for these contributions.
From 1 July 2017, the 10% maximum earnings condition will be removed. This means most people under 75 years old will be able to claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test). To satisfy the work test, you must work at least 40 hours during a consecutive 30-day period.
You can claim a deduction for personal super contributions made on or after 1 July 2017 if:
- you made the contribution to a complying super fund or a retirement savings account that is not a
- Commonwealth public sector superannuation scheme in which you have a defined benefit interest
- CPF or other untaxed fund that would not include your contribution in its assessable income
- Super fund that notified the ATO before the start of the income year that they elected to treat all member contributions to
- the super fund as non-deductible
- the defined benefit interest within the fund as non-deductible.
- you notify your fund in writing of the amount you intend to claim as a deduction
- your fund acknowledges your intent to claim a deduction in writing
- if you are 75 years old or older, you can only claim a deduction for contributions you made on or before the 28th day of the month following the month in which you turned 75.
Concessional contributions cap from 1 July 2017 $25,000 for everyone
Concessional (pre-tax) contributions to your super include:
- employer contributions
- any amount you salary sacrifice into super
- personal contributions you claim as a personal super contribution deduction
As concessional contributions are paid before tax is applied, it means that your super fund pays tax on the contributions at 15%.
From 1 July 2017, the concessional contributions cap is $25,000 for everyone.
The contributions that you claim as a deduction will count towards your concessional contributions cap. If you exceed your cap, you will have to pay extra tax and any excess concessional contributions will count towards your non-concessional contributions.
If you have a year of substantial capital gain or income, you can claim concessional contribution against capital gain which will reduce income.
Carry-forward of unused concessional contributions
From 1 July 2018, you will be able to carry-forward any unused amount of your concessional contributions cap. You will be able to access your unused concessional contributions cap on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.
The first year in which you can access unused concessional contributions is 2019-20.
You will only be able to carry forward your unused concessional contributions cap if your total super balance at the end of 30 June of the previous financial year is less than $500,000.
Change to Division 293 income threshold from 1 July 2017
Currently, individuals with income and concessional super contributions greater than $300,000 will trigger a Division 293 assessment.
From 1 July 2017, the Division 293 income threshold will decrease to $250,000. An individual with income, and concessional super contributions, exceeding the $250,000 threshold will have an additional 15% tax imposed on the lessor of: –
- the excess, or
- the concessional contributions (except excess contributions)
New transfer balance cap for retirement phase accounts from 1 July 2017
A new transfer balance cap applies for people who are retired and have $1.6 million or more in their retirement phase super accounts.
The ‘transfer balance cap’ is a limit on how much of your super you can transfer from your accumulation super account(s) to tax-free retirement phase account(s) to receive your pension income.
The transfer balance cap will start at $1.6million, and will be indexed in line with the consumer price index (CPI), rounded down to the nearest $100,000.
Earnings on 1.6million not included in cap
If the total amount in your pension account(s) grows over time (through investment earnings) to more than $1.6 million, you won’t exceed your cap. If the amount in your pension account(s) goes down over time, you can’t “top it up” if you have already used your cap.
If you exceed your transfer balance cap, you may have to remove the excess from one or more retirement phase income streams, and pay tax on the notional earnings related to that excess.
Different tax rules will apply if you receive certain defined benefit income streams.
Transitional CGT relief
If you have to move assets out of your retirement phase account back into your accumulation account to be under the cap before 1 July 2017, capital gains tax (CGT) relief may be available to your super fund to reset the cost base of these assets. CGT relief is available if your fund holds the assets throughout the period from 9 November 2016 to 30 June 2017.
Foreign resident CGT withholding regime from 1 July 2016
Broadly, where a foreign resident disposes of certain taxable Australian property with market value > $2 million, the purchaser will be required to withhold 10% of the purchase price and pay that amount to the Australian Taxation Office (ATO). From 1 July 2017, the threshold has decreased to $750,000.
The purchaser must withhold 10% of the purchase price unless the vendor shows the purchaser a clearance certificate from the ATO. This certificate can be provided to the purchaser on or before the settlement of the transaction. Where a clearance certificate is provided, the purchaser is not required to withhold an amount from the purchase price.
If the vendor fails to provide the certificate by settlement, the purchaser would be required to withhold 10% of the purchase price and pay this to the ATO.
This means Australian resident vendors of real property with a market value of $2 million or above will need to apply for a clearance certificate and provide this to the purchaser before settlement to ensure no funds are withheld from the sale proceeds.
Three online forms will be made available at ato.gov.au/FRCGW before 30 June 2016. These are:
- Clearance certificate application for Australian residents (valid for 12 months)
- Rate Variation application for foreign residents and other parties
- Purchaser payment notification