Tax rates and tax codes change every year, and unless you are keen, you could miss out on important information that affects your personal tax returns, your business, or your investments. To avoid getting caught off guard, you are better off contracting the services of professional tax accountants. Accounting professionals have a responsibility to stay on top of any new tax laws and to inform their clients of any changes so that together, they can come up with good tax strategies. Here are some recent changes to the tax code that you should be aware of.
You can now claim a deduction if you make personal superannuation contributions from your salary
Previously, individuals couldn’t claim a personal superannuation contribution deduction if over 10% of their income came from wages and salaries. However, since 1 July 2017, the 10% rule was done away with, which means that most people in the workforce can now claim a tax deduction when they make personal super contributions.
Corporate tax rates are slightly lower
In the last year, the corporate tax was at 28.5%. It has been reduced by 1% to 27.5% for the current year for companies that are categorized in the SBE (Small Business Entity) bracket. Additionally, the definition of an SBE has been changed for taxation purposes. Initially, SBEs were companies with an annual aggregate turnover of $2 million or less, but the term is now used to refer to companies with an annual aggregate turnover of $10 million or less.
Property buyers may have to withhold tax from the price of purchase
According to the new foreign resident capital gains withholding rules, some properties that are under contracts which were entered into after June 2017, are subject to taxation under new conditions. Properties that are worth $750,000 or more will be subjected to a withholding tax rate of 12.5%. The previous conditions were quite different. For the period between July 2016 and June 2017, properties worth $2 million were subjected to a withholding tax rate of 10%. It should be noted that the dates refer to when the contract is entered into, not when it is settled. The FRCGW (foreign resident capital gains withholding) rules were created to prevent foreign property owners from selling off their real estate and other property at a profit without having to pay any tax. If you are a foreigner and you don’t want your tax to be withheld, you should ensure that you apply for a tax clearance certificate before your sell contract is settled. Since the process is a bit technical, you are better off hiring tax accountants who have an expert understanding of the Australian tax code.
Travel cost deductibles related to investment properties have been scraped
Since 1 July 2017, you can no longer write off the costs of traveling to and from your rental or lease properties. The ATO no longer allows deductions for traveling costs when you visit your properties to inspect them, to carry out maintenance, or even to collect rent. This may not be a big deal if your properties are located close to where you live, but if they are further away, say in a different state, you may be better off if you make alternative arrangements.
You shouldn’t make any assumptions when it comes to filing your taxes, whether you are a business owner, a foreign national, or a resident of Australia. The tax code changes very often, and if you rely on your past knowledge, you may end up messing your personal finances or violating certain ATO requirements. At the same time, you may be too busy to catch up on every minute detail of the tax code. To put your mind at ease, you should retain the services of business accountants who are able to see to it that your business or personal tax plans are up to date to ensure that your returns are fully compliant with the tax code.