Increase in the Medicare levy from 1 July 2019
From 1 July 2019, the Government will increase the Medicare levy from 2% to 2.5% of taxable income.
Other tax rates that are linked to the top personal tax rate, such as the fringe benefits tax rate, will also
be increased. Low-income earners will continue to receive relief from the Medicare levy through the
low-income thresholds for singles, families, seniors and pensioners. The current exemptions from the
Medicare levy will also remain in place.
Limiting plant and equipment depreciation deductions to outlays actually incurred by investors – for residential investment properties acquired from Budget night on 9 May 2017.
From 1 July 2017, the Government will limit plant and equipment depreciation deductions to outlays
actually incurred by investors in residential properties. Plant and equipment items are usually
mechanical fixtures, or those that can be ‘easily’ removed from a property such as dishwashers and
ceiling fans. These changes will apply on a prospective basis, with existing investments grandfathered.
- Plant and equipment forming part of residential investment properties as of 9 May 2017 (including
contracts already entered into at 7:30PM (AEST) on 9 May 2017) will continue to give rise to
deductions for depreciation until either the investor no longer owns the asset, or the asset reaches
the end of its effective life.
- Investors who purchase plant and equipment for their residential investment property after 9 May
2017 will be able to claim a deduction over the effective life of the asset. However, subsequent
owners of a property will be unable to claim deductions for plant and equipment purchased by a
previous owner of that property. Acquisitions of existing plant and equipment items will be
reflected in the cost base for CGT purposes for subsequent investors.
This is an integrity measure to address concerns that some plant and equipment items are being
depreciated by successive investors in excess of their actual value.
No deduction for travel expenses for residential rental properties
From 1 July 2017, the Government will disallow deductions for travel expenses related to inspecting,
maintaining or collecting rent for a residential rental property.
This is an integrity measure to address concerns that many taxpayers have been claiming travel
deductions without correctly apportioning costs, or have claimed travel costs that were for private travel
purposes. This measure will not prevent investors from claiming a deduction for costs incurred in
engaging third parties, such as real estate agents, for property management services.
Extending the $20,000 immediate write-off for small business
Under current law, the $20,000 immediate write-off ends on 30 June 2017. However, the Government
has proposed to extend the concession by 12 months to 30 June 2018 for businesses with an
aggregated annual turnover less than $10 million.
This means small businesses will be able to immediately deduct purchases of eligible assets costing
less than $20,000 first used or installed ready for use by 30 June 2018. Assets valued at $20,000 or
more (which cannot be immediately deducted) can continue to be placed into the small business
simplified depreciation pool (the pool) and depreciated at 15% in the first income year and 30% each
income year thereafter. The pool balance can also be immediately deducted if the balance is less
than $20,000 over this period.
Further, the current ‘lock out’ laws for the simplified depreciation rules (these prevent small businesses
from re-entering the simplified depreciation regime for five years if they opt out) will continue to be
suspended until 30 June 2018.
From 1 July 2018, the immediate deductibility threshold and the balance at which the pool can be
immediately deducted will revert back to $1,000.