August 2017 Tax Update

Purchasing property? You may be required to withhold tax from the purchase price.

New rules for foreign resident capital gains withholding (FRCGW) apply to vendors disposing of certain taxable property under contracts entered into from 1 July 2017. The changes will apply to disposals where the contract price for a property is $750,000 and above (previously $2 million) and the withholding tax rate will be 12.5% up from 10%. The previous threshold and rate will apply to any contracts entered into from 1 July 2016 but before 1 July 2017, even if they are not due to settle until after 1 July 2017. For vendors who are selling a property, to ensure that tax is not withheld on the property, you must apply for a tax clearance certificate prior to the settlement date.

Changes to deductions for personal superannuation contributions

Prior to 1 July 2017, for an individual who earned income from salary or wages were unable to claim a deduction for personal superannuation contributions if more than 10% of their income was from salary and wages. From 1 July 2017, this 10% rule has been scrapped which effectively means that most people under the age of 75 will be able to claim a tax deduction for personal super contributions.

Company Rates of Tax – 2016/17

A reduced corporate tax rate of 27.5% applies for the 2017 income year (which is a 1% reduction from 28.5% for the 2016 income year) to a company that is a Small Business Entity (SBE). In the  2017 income year, a company is an SBE if it carries on business and has an aggregated annual turnover of less than $10 million ( a increase from the $2 million threshold in place for the 2016 income year).