2016/17 year end - tax changes for individuals
As 30 June 2017 is fast approaching, we have briefly summarised the important tax changes to remember when collating your tax information.
Travel deduction for residential rental property
The 2017 financial year will be the last year an individual can claim a deduction for travel to their residential rental property.
This rule is still subject to being passed as legislation. However, to avoid any disappointment a landlord may look to move forward an inspection to before 30 June 2017 to be assured a deduction will be allowed.
All regular rules still apply until 30 June 2017 in regards to substantiation.
“The 2017 financial year will be the last year an individual can claim a deduction for travel to their residential rental property.”
Plant and equipment deductions to be changed after 30 June 2017
Deductions for plant and equipment depreciation on residential property will only be allowed on actual purchases from 1 July 2017. That is, plant and equipment purchased with the property (ie remaining fixtures) will not be allowed a deduction, generally appearing on a Quantity Surveyor’s report.
For property held before 9 May 2017 (budget night), it is advised that a Quantity Surveyor’s report is prepared for the year ending 30 June 2017. Note: there are no changes to the current Division 43 capital works provisions.
Temporary budget repair levy
The 2016/17 income year is the final year of the Temporary budget repair levy, which is an additional 2% levy for individuals with taxable income over $180,000.
Following 1 July 2017, the highest marginal rate of taxation is 47% being the 45% marginal rate plus 2% Medicare levy. This also applies for Fringe benefits tax.
“The 2016/17 income year is the final year of the temporary budget repair levy — after 30 June 2017 this levy will no longer apply.”
Main residence exemption still applies for foreign residents
Clients who are foreign residents may want to consider the change in capital gains tax rules that will apply from now until 30 June 2019.
For foreign residents who held a main residence (or “absence rule” main residence) at 9 May 2017, the exemption from capital gains tax will be removed after 30 June 2019. It is also worth noting that foreign residents do not get access to the general discount either.
If you would like to discuss these changes with us further, please do not hesitate to contact.
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au
Norman Ruan
Accountant
T: 02 9984 7774
E: normanr@northadvisory.com.au
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
2016/17 was the last year individuals could generally claim travel deductions for residential rental property visits.
Landlords planning inspections should time them before 30 June 2017 for deductibility.
Plant and equipment deductions for rental properties were set to change from 1 July 2017.
Only items purchased outright after that date would be deductible (fixtures included with the property would not).
The temporary 2 % budget repair levy on high-income earners ended after the 2016/17 year.
Higher-income taxpayers no longer faced this additional levy from 1 July 2017.
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Frequently Asked Questions
What travel deduction change applies for residential rental properties?
For the 2016/17 year, individuals could claim a deduction for travel to inspect or maintain their residential rental properties — but this was the last year that such claims were generally available.
What is changing for plant and equipment deductions on residential property?
From 1 July 2017, deductions for plant and equipment in residential rental properties would only be available for actual purchases made after that date — meaning existing fixtures or items acquired with the property would no longer be deductible.
What is the temporary budget repair levy and how does it affect individuals?
The temporary budget repair levy was an additional 2 % tax on individuals earning over $180,000. The 2016/17 tax year was the final year this levy applied; it was abolished from 1 July 2017.
How are foreign residents affected by main residence exemption changes?
Foreign residents who held a main residence at 9 May 2017 would see changes to the capital gains tax exemption after 30 June 2019 — the “absence rule” main residence exemption would be removed for such taxpayers.
Do these changes affect how I prepare my 2017 tax return?
Yes — because travel deductions for rental properties and plant/equipment deductions were about to change, taxpayers needed to consider timing their work or purchases before 30 June 2017 to maximise deductions in that year.
What were the main tax changes for individuals in the 2016/17 financial year?
In the 2016/17 income year, key changes for individuals included the final year of the Temporary Budget Repair Levy (an extra 2% tax on taxable income over $180,000) and an update for foreign residents, where the CGT main residence exemption was set to be removed after 30 June 2019 (with transitional rules applying before then).
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