New tax changes for property investors and business owners
Announcement posted by Chan & Naylor 10 Jul 2017
Starting 1 July, the government has removed these tax deductions even for investors traveling to maintain and inspect premises or collect rent because according to them, many have been obtaining these deductions incorrectly.
Other property-related changes that you should be aware of, include the applicable CGT withholding rate for foreign tax residents which will increase to 12.5 percent starting 1 July 2017 and the threshold for residential property which will drop to $750,000. The government is also limiting plant and equipment depreciation deductions to outlays actually incurred on new items by investors in residential real estate properties.
The new budget comes with a dramatic change to the full claim of small businesses as well. The turn over limit was raised to $10 million and the $20,000 ceiling was extended.
Before the 2015 budget announcement, any purchase over $1,000 could not be claimed as a whole.
Under the small business entitlements and general business depreciation rule, you could claim 15% in the first year and 30% of the remaining balance every consecutive year until the balance is written off in eight years.
Now it was announced that the program will be extended until 30 June 2018 and it includes businesses with an annual turnover below $10,000,000, instead of the previous $2,000,000.
The advantage it gives to a sole trader in terms of the business' taxable income is relative to the tax bracket of his income. Any purchase with a cost base of $1,000 or less would show a tax benefit to the small business in small increments over many years as the asset depreciated in value.
Until 30 June 2018, any purchase with a cost base of up to $20,000 can be claimed in full in the first year.
If you are registered for GST, you have the opportunity to buy any item which includes GST up to $22,000, assuming that it is being 100% claimed for work purposes. You will get the GST back in full, leaving the claimable amount at the $20,000 threshold.
However, you cannot buy a product for $30,000 that has 60% work use and claim the full $18,000 (60% of $30,000) under the new system. The cost base has to be $20,000 or below prior to any work percentage implications.
For more information about property investment and business in Australia, contact a Specialist to discuss your particular circumstances.
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