Key changes and measures to be aware of when completing clients’ 2017 returns include (among others):
- Working holiday makers tax rate. From 1 January 2017, working holiday makers on a 417 or 462 visa must pay 15% tax on working holiday income up to $37,000.
- Norfolk Island tax. From 1 July 2016, Norfolk Island residents are taxed in their Norfolk Island income and subject to the Medicare levy.
- Foreign resident capital gains withholding (‘FRCGW’). There are new labels in the tax return to ensure any FRCGW credit is claimed correctly.
- Farm management deposit (‘FMD’) reforms. From 1 July 2016, the following changes were made to the FMD scheme:
- Early access provisions for primary producers experiencing drought were reintroduced;
- The cap on FMDs that can be held by primary producers was increased from $400,000 to $800,000; and
- The legislative restriction on the use of FMDs as interest offset accounts against farm business loans was removed.
- Small business entity (‘SBE’) concessions access expanded. From 1 July 2016, a range of SBE tax concessions became available to all businesses with a turnover of less than $10 million (before that, the turnover threshold was $2 million). The $10 million threshold applies to most concessions, expect for:
- The small business income tax offset, which has a threshold of $5 million (available to individuals); and
- Capital gains tax (CGT) concessions, which continue to have a threshold of $2 million.
- Small business income tax offset changes. from 1 July 2016, an individual may be entitled to a tax offset for the tax payable on their small business income. The income must be earned by a sole trader, partnership or trust that is an SBE. The small business income tax offset:
- Increased from 5% to 8% with a limit of $1,000 each year;
- Applies to small businesses with turnover less than $5 million (previously $2 million).
- Small business company tax rate reduced. The small business company tax rate has been reduced from 28.5% to 27.5% for the 2017 income year, and this lower rate also applies to small businesses that are corporate unit trusts and public trading trusts.
Eligible small businesses must complete the checkbox in the Status of company section on their company tax return. Small businesses must also base their franking of distributions on the 27.5% tax rate.
The company tax rate will remain at 30% for all other companies.