The New Federal Budget and your Tax and Property Investment

Property Tax

Our second update on the new federal budget covers Tax and Property Investment.

These are the main areas of interest:

  1. Increase in Medicare levy
  2. Increase to Medicare levy low-income thresholds
  3. Capital Gains Tax Rules
  4. Reduced residential property deductions
  5. How we can help
  1. Increase in Medicare levy

From 1 July 2019, the Medicare levy will increase by 0.5% to 2.5% of taxable income. The increase ensures the National Disability Insurance Scheme (NDIS) is fully funded.

  1. Increase to Medicare levy low-income thresholds

The 2016-17 financial year Medicare levy low-income threshold will be increased as follows:

Family status 2016-17 2015-16
Single $21,655 $21,335
Single, eligible for seniors and pensioners tax offset (SAPTO) $34,244 $33,738
Couple $36,541 $36,001
Couple, eligible for SAPTO $47,670 $46,966
Additional threshold for each dependent child $3,356 $3,306
  1. Strengthening the integrity of Capital Gains Tax rules for foreign investors

The Government is introducing tougher rules on foreign investment in real estate to ensure foreign investors meet their Capital Gains Tax (CGT) obligations. The main residence CGT exemption for foreign and temporary tax residents that own Australian real estate will be removed. To reduce the avoidance of foreign residents’ CGT in Australia, the Government will bolster the withholding regime.

  1. Reduced residential property deductions

From 1 July 2017, the Government will no longer allow deductions for travel expenses related to inspecting, maintaining or collecting rent for residential rental property. However, investors can continue to deduct those types of expenses incurred by third parties such as real estate agents and property management services.

In addition, from 1 July 2017, depreciation deductions on plant and equipment (for example dishwashers and fans) will be limited to outlays actually incurred on residential properties. For plant and equipment purchased after 9 May 2017, deductions are claimable over the effective life of the asset only by the investor who bought the items.

For investors with existing investments as at Budget night, grandfathering rules will apply, broadly allowing deductions to continue until either the investor no longer owns the asset or the asset reaches the end of its effective life.

  1. How we can help

The end of this financial year is approaching quickly.

If we haven’t reviewed your tax situation recently book a call with Allan Mason here.

Allan will review your tax position, answer your questions and advise on the best action steps you can take to get your tax affairs in top shape.

If you are serious about minimising your tax this year come and hear Allan himself explain how you can do this. You can register for his webinar presentation here

About Allan Mason

Allan is a Chartered Accountant, SMSF Specialist,
SMSF Auditor, Company Auditor, Registered Tax Agent

As the Principal of Encore Accounting Allan is committed to a service of excellence providing valued services to you directly and leading a highly competent and equally dedicated team of accounting and finance professionals.

Allan is delighted to be at your service.


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