IT S MORE THAN A WORKBOOK. IT S READY TO GO WHEN YOU ARE.

Transcription

1 IT S MORE THAN A WORKBOOK. IT S READY TO GO WHEN YOU ARE.

2 Contents Contents... 2 Overview... 7 Tax changes affecting multiple returns Conclusion of the temporary budget repair levy (TBRL) Foreign residents CGT main residence exemption and principal asset test Increasing the CGT discount for investors in affordable housing Changes to foreign resident capital gains withholding (FRCGW) Accelerated depreciation for small businesses extended until 30 June Limiting plant and equipment depreciation deductions for residential premises assets Removal of residential rental property travel expenses for individuals Vacancy fee for foreign acquisitions of residential property International Dealings Schedule (IDS) Tax incentives for early stage innovation companies Tax incentives for early stage venture capital limited partnerships (ESVCLP) Junior minerals exploration incentive (JMEI) Country-by-Country reporting: phase Diverted profits tax (DPT) Tax changes for individual returns Medicare levy low-income threshold increase Temporary budget repair levy fringe benefit tax changes FBT rate sunset FBT changes and income tests for tax offsets Allocation of PAYG credits and payments received against overseas repayment levies Cost of managing tax affairs Tax deductions for personal superannuation contributions Tax offset for spouse contributions increase in income threshold Transfer balance cap Reporting taxable government grants and specified payments Tax changes for company returns Tax rate reduction for companies who qualify as base rate entities Extension of tax rate reduction Tax rate reductions franking credits Tax changes for superannuation and SMSFs Strengthening the integrity of income streams Removal of the existing anti-detriment provisions Total superannuation balance Transfer balance cap

3 Superannuation changes from 1 July Concessional contributions cap reduction Non-concessional contributions cap reduction Five-year carry forward of concessional contribution cap First home super saver scheme (FHSS) Division 293 threshold reduction Streamlining superannuation release authorities Innovative retirement income stream products Budget commentary Individuals A new seven-year personal income tax plan Medicare levy low income thresholds to increase Retaining the Medicare levy at 2% Income tax exemption for certain veteran payments License schemes to license an individual s fame or image targeted Businesses R&D tax incentive changes Companies with annual turnover above $20 million Companies with annual turnover less than $20 million $20,000 immediate asset write-off extended Division 7A UPE rule strengthened major reform delayed Deductions for vacant land to be denied No small business CGT concessions for assignment of partnership rights 129 Non-compliant payments to employees and contractors no longer deductible Significant global entity definition broadened Tightening of thin capitalisation rules Tax exempt entity loans % CGT discount removed for MITs and attribution MITs at the trust level Anti-avoidance rules for circular trust distributions extended to family trusts Testamentary trusts and injected assets Superannuation Increased membership of SMSFs Three-yearly audit cycle for some SMSFs Preventing inadvertent concessional cap breaches Improving integrity of personal contributions deductions Super work test exemption for recent retirees

4 Black economy measures Reforms to combat illegal phoenixing and black economy Taxable payments reporting system to be expanded Large government contract tenders required to be tax compliant Practitioner lodgment service (PLS) How to use PLS PLS lodgment flow ATO pre-fill for individual returns What data will be pre-filled? How do I use pre-fill manager? Support Matters /7 access to Knowledge Base and help Check out our new improved Knowledge Base How do I use [F1] help? Training Ask a colleague FAQs from our support desk Most popular KB articles How to distribute a foreign tax credit from a trust How to distribute an overall trust loss between trusts (V335 error) Key dates and support contact details MYOB Tax release date ATO ELS gateway ATO availability ATO PLS lodgments ATO PLS processing ATO refunds Getting support from MYOB Submit a support request Contact details Extended support hours for tax season Online community forum for accountants End of financial year hub Appendix A 2018 Tax rates Resident individual Non-resident individual Unearned income of resident minors (under 18 years) Unearned income of non-resident minors (under 18 years) Tax rates for working holiday makers (WHMs) from 1 January Medicare levy Medicare levy surcharge

5 Low income tax offset Private health insurance rebate Dependency offsets Zone and overseas forces rebate Seniors and pensioners tax offset (SAPTO) SAPTO pension age test tables Net medical expenses tax offset (NMETO) Motor vehicle rates per business km Private company loans Research and development (R&D tax offset) Income test thresholds HELP, TSL, SSL or ABSTUDYSSL and SFSS thresholds Student financial supplement loan repayments thresholds Employment termination payments Genuine redundancy and early retirement scheme payment limits Superannuation lump sum caps (indexed annually) Transfer balance cap and defined benefit income cap Superannuation contributions caps concessional Superannuation contributions caps non-concessional Income exceeding $250,000 extra tax on contributions Superannuation guarantee charge Government super co-contribution rates Low-income superannuation contributions offset Low-income superannuation tax offset Super contributions on behalf of spouse offset Supervisory levy self-managed super funds Improvements to pre-cgt assets General interest charge rates Fringe benefits tax Company tax rates Trustee tax rates Individual beneficiaries assessed under section 98(3) and 98(4) Company trustee beneficiaries assessed under section 98(3) and 98(4) Deceased estate less than 3 years from date of death (section 99) Deceased estate greater than 3 Years from date of death resident beneficiary Deceased estate greater than 3 years from date of death resident beneficiary No beneficiary presently entitled (section 99A)

6 OVERVIEW

7 Overview Changes to Australian Tax and MYOB Tax 2018 are listed below. Tax changes affecting multiple returns Conclusion of the temporary budget repair levy (TBRL) Foreign residents CGT main residence exemption and principal asset test Increasing the CGT discount for investors in affordable housing Changes to foreign resident capital gains withholding (FRCGW) Accelerated depreciation for small business entities extended until 30 June 2018 Limiting plant and equipment depreciation deductions for residential premises assets Removal of residential rental property travel expenses for individuals Vacancy fee for foreign acquisition of residential property International dealings schedule (IDS) Tax incentives for early stage innovation companies Tax incentives for early stage venture capital limited partnerships (ESVCLP) Junior minerals exploration incentive (JMEI) Country-by-Country reporting: phase 2 Diverted profits tax Tax changes for individual returns Medicare levy low-income threshold increase Temporary budget repair levy fringe benefit tax changes FBT rate sunset FBT changes and income tests for tax offsets Allocation of PAYG credits and payments received against overseas repayment levies Cost of managing tax affairs Tax deductions for personal superannuation contributions Tax offset for spouse contributions increase in income threshold Transfer balance cap Reporting taxable government grants and specified payments Tax rate reduction for companies who qualify as base rate entities Tax changes for partnership returns No changes for 2018 Tax changes for trust returns No changes for

8 Tax changes for company returns Tax rate reduction for companies who qualify as base rate entities Extension of tax rate reduction Tax rate reductions for franking credits Tax changes for superannuation and self managed super funds Strengthening the integrity of income streams Removing the existing anti-detriment provisions Total superannuation balance Transfer balance cap Budget commentary Tax highlights and summary from the 2018 federal budget Practioner lodgment service (PLS) Overview of the how, the why, and the when of PLS to date, plus what s next ATO pre-fill of individual returns A walk-through of the new ATO pre-fill features and workflow for individual returns Support Matters What s changed with your support options and a look at some common tax calls Key dates and support contact details All the important dates for your reference 8

9 Tax changes affecting multiple returns

10 Tax changes affecting multiple returns Conclusion of the temporary budget repair levy (TBRL) Forms affected I T C F MS Legislative changes Tax Laws Amendment (Temporary Budget Repair Levy) Act 2014 received Royal Assent on 25 June The temporary budget repair levy (TBRL) will cease to apply from 1 July The ATO will cease the TBRL for assessments onwards. The TBRL applies from 1 July 2014 to 30 June 2017 and adds an additional 2% tax on income over $180,000. What are the changes? Tax rates will decrease from 47% to 45% for: Trustees liable under S99A Trustees liable under S98(4) Non-complying superannuation funds Non-arm s length component of the taxable income of a superannuation fund Non-complying approved deposit funds Non-arm s length component of the taxable income of an approved deposit fund Non-arm s length component of the taxable income of a pooled superannuation trust Non-TFN contributions income of a superannuation fund or retirement savings account provider, less the ordinary rate of tax paid by the fund or provider Share of the net income of a partnership attributable to a partner not having control and disposal of that income The calculation that applies to the Div6AA The non-final withholding tax rate for bearer debentures Employee share schemes Excess non-concessional contributions tax Interest on non-resident trust distributions Trust recoupment tax Family trust distribution tax (primary liability) Trustee beneficiary non-disclosure tax (102UK(2)(a) Trustee beneficiary non-disclosure tax (102UM(2)(a)PLS review Untainting tax. 10

11 11

12 What are the changes in MYOB Tax? Trusts In the 2017 tax tables, 2% TBRL is included for amounts payable by the trustee that either exceed the $180,000 distribution or have the highest marginal rate applicable to the distribution. The above rate is applicable to distributions made using the tax tables for: S98(1) Present entitlement under legal disability S98(2) Deemed Presently entitled s95a(2) not under S98(3) & s98(4) Non-resident Individual Trustee beneficiary S98(3) & s(98)4 Non-resident company beneficiary S99 Bankruptcy Estate S99 Deceased Estate less than 3 years from date of death S99 Deceased Estate Greater than three years from date of death S99 Excepted Trust Income Section 102AG(2)(c) S99A Any Other Estate. 12

13 The 2018 rates are shown below. The TBRL has been deleted from the box and the calculation. This includes applying these rates to beneficiaries who are under the age of 18 and come under division 6AA rates (47% reduced to 45% for the conclusion of the TBRL). Therefore, the top marginal rate reduces to 45% (plus 2% Medicare levy, totalling 47%). 13

14 Superannuation funds & SMSFs 2017 Superannuation Fund Tax Rates > Complying funds: 2018 changes: 14

15 2017 Superannuation Fund Tax Rates > Non-complying: 2018 changes: 15

16 2017 Superannuation Fund Tax Rates > Complying Approved Deposit Funds: 2018 changes: 16

17 2017 Superannuation Fund Tax Rates > Non-complying Approved Deposit Funds: 2018 changes: 17

18 2017 Superannuation Fund Tax Rates > Pooled Superannuation Trusts: 2018 changes: 18

19 Foreign residents CGT main residence exemption and principal asset test Forms affected I T Legislative changes The Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Bill 2017, had the second reading moved before Senate on 19 March To date, this bill is not law. What are the changes? The foreign resident CGT change will deny foreign tax residents access to the CGT main residence exemption from 7:30pm (AEST) on 9 May Existing properties held prior to this date will be grandfathered until 30 June The proposed start date for the measure is 9 May Foreign residents who dispose of property after 9 May 2017 must determine their CGT liability and comply with the foreign resident CGT withholding (FRCGTW) rules. Individuals Under the proposed law, if individuals are foreign residents when a CGT event occurs to a dwelling in which they have an ownership interest, the individuals won t be entitled to the CGT main residence exemption. Deceased estates A trustee of a deceased estate will not be entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling of a deceased individual if the deceased was a foreign resident at the time of death. A beneficiary of a deceased estate will also not be entitled to the portion of the CGT main residence exemption in respect of an ownership interest in a dwelling of a deceased individual if the deceased was a foreign resident at the time of death. However, a beneficiary of a deceased estate is entitled to the portion of the CGT main residence exemption in respect of an ownership interest in a dwelling of a deceased individual if the deceased was a resident at the time of death. This applies even if the beneficiary is a foreign resident at the time a CGT event occurs to the dwelling. 19

20 The beneficiary is denied any additional component of the main residence exemption that they are otherwise entitled to if they are a foreign resident at the time a CGT event occurs to the dwelling. Special disability trust A trustee of a special disability trust is not entitled to the CGT main residence exemption in respect of an ownership interest in a dwelling, if the principal beneficiary of the trust was a foreign resident at the time: a CGT event occurs to the dwelling of their death. A beneficiary who is bequeathed an ownership interest in a main residence at the time of death of the principal beneficiary of a special disability trust is not entitled to the CGT main residence exemption accrued by the special disability trust if the principal beneficiary was a foreign resident at the time of their death. What are the changes in MYOB Tax? None. 20

21 Increasing the CGT discount for investors in affordable housing Forms affected I T (g) Legislative changes The Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Bill 2017, had the second reading moved before Senate on 19 March To date, this bill is not law. What are the changes? An additional 10% CGT discount will be made available to resident individuals investing in qualifying affordable housing. This means investors in qualifying affordable housing will be entitled to a 60% discount on capital gains tax. To qualify for the additional discount, housing must be provided at below market rent and made available for eligible tenants on low to moderate incomes. Tenant eligibility will be based on household income thresholds and household composition. The affordable housing must also be managed through a registered community housing provider and the investment held as affordable housing for at least three years. The additional discount will be pro-rated for periods where the property is not used for affordable housing purposes. Non-residents will be ineligible for the CGT discount. The additional discount will also flow through to resident individuals investing through managed investment trusts (MITs) where the property has been held for a minimum of three years. What are the changes in MYOB Tax? None. 21

22 Changes to foreign resident capital gains withholding (FRCGW) Forms affected I P T C F MS Legislative changes The Treasury Laws Amendment (Foreign Resident Capital Gains Withholding Payments) Act 2017 received Royal Assent on 22 June What are the changes? This implements two changes that were announced as part of the federal budget: A reduction in the threshold for real property interests from $2 million to $750,000 An increase in the withholding rate from 10% to 12.5%. These two changes affect contracts entered into on or after 1 July It imposes an obligation on purchasers to withhold 12.5% of the purchase price and pay it to the ATO. The foreign resident vendor must lodge a tax return at the end of the financial year, declaring their Australian assessable income, including any capital gain (profit) from the disposal of the asset. Australian resident vendors can avoid the requirement of the purchaser to withhold the 12.5% by providing one of the following to the purchaser prior to settlement: for Australian real property, a clearance certificate obtained from the ATO Australian resident vendors selling real property need to obtain a clearance certificate from the ATO prior to settlement, to ensure they don't incur the 12.5% non-final withholding for other asset types, a vendor declaration the vendor may provide the purchaser with a vendor s declaration to specify withholding is not required on the acquisition of the asset. Foreign resident vendors may apply for a variation of the withholding rate or make a declaration that a membership interest is not an indirect Australian real property interest. 22

23 What are the changes in MYOB Tax? Company, superannuation fund and SMSF returns FRCGW is calculated from the tables: Click H8 to open the Foreign resident capital gains withholding worksheet. Click any of the buttons shown to see the tables where the FRCGW is credited to the taxpayer: 23

24 By completing the worksheet, the figure will be displayed in FRCGW Credit: 24

25 Individual returns Item 18, label X: Click label X in item 18, to open the calculator of FRCGW: 25

26 Trust returns Item 21, label B Click label B in item 21, to open the calculator of FRCGW: 26

27 Click Distributions from Trusts: 27

28 Accelerated depreciation for small businesses extended until 30 June 2018 Forms affected none Legislative changes The Tax Laws Amendment (Small Business Measures No. 2) Act 2015 and Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Act 2017 received Royal Assent on 22 June What are the changes? Small business entities can continue to claim an instant asset write-off for assets purchased that are under $20,000. What are the changes in MYOB Tax? There are no changes in MYOB Tax for The depreciation worksheet (d) calculations remain the same. 28

29 Limiting plant and equipment depreciation deductions for residential premises assets Forms affected I P T MS (ren) (d) Legislative changes The Treasury Laws Amendment (Housing Tax Integrity) Act 2017 received Royal Assent on 30 November What are the changes? Depreciation deductions on previously used plant and equipment for residential rental properties are no longer allowed. Changes apply to assets acquired from 7.30pm (AEST) on 9 May 2017, unless the asset was acquired under a contract entered into before this time. The changes also apply to assets acquired before this time if the assets were first used or installed ready for use by an entity during or prior to the income year, but the asset was not used at all for a taxable purpose in that income year. For a newly built property, or a property that has been substantially renovated, depreciation deductions for decline in value of the new depreciating assets is allowed if no one previously claimed any depreciation deductions on it, and either: no one lived in the property when it was acquired, or if anyone lived in the property after it was built or renovated, it was acquired within six months (of the property being built or renovated). The changes do not affect depreciation deductions for decline in value that arise for: new depreciating assets in a new residential rental property new depreciating assets in a residential rental property that is not new a rental property that does not provide residential accommodation if you carry on a business corporate tax entities superannuation plans other than self-managed superannuation funds public unit trusts managed investment trusts unit trusts or partnerships whose members are any of these listed entities. The proportion of the decline in value of the asset that cannot be deducted, is recognised as a capital gain or loss when the asset stops being used. 29

30 What are the changes in MYOB Tax? We ve added an information message to the 2018 Rental Property Schedule: 30

31 MYOB depreciation worksheet (d) changes We ve added a new question Is the deduction denied in accordance with Treasury Laws Amendment (Housing Tax Integrity) Act 2017 regarding previously used assets (P & E)? Y/N. It will be N by default, which means that depreciation will be calculated as it is in our system. We ve added a new field Non-ded. depreciation for non-deductible depreciation. If answer to the new question is Y, the depreciation amount calculated is displayed in Non-ded. depreciation rather than Business depreciation. The private use percentage will work the same way as it works for business depreciation, for example, if private use is 10%, 10% of the full depreciation amount will go to Private use depreciation and the remaining 90% will go to Non-ded. depreciation. For assets rolled over from , change the checkbox from N to Y with the corresponding change in calculation. 31

32 Removal of residential rental property travel expenses for individuals Forms affected none Legislative changes The Treasury Laws Amendment (Housing Tax Integrity) Act 2017 received Royal Assent on 30 November What are the changes? Disallow deductions of travel expenses for residential rental property. A residential premise (property) is land or a building that is: occupied as a residence or for residential accommodation intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation. Travel expenses can still be claimed if: you are running a property investing business you are an excluded entity, such as a: corporate tax entity superannuation plan that is not a self-managed superannuation fund public unit trust managed investment trust you are a unit trust or a partnership, and all members are entities of a type listed above the investment property is a commercial premise. Generally, owning one or several rental properties will not be considered as being in the business of rental properties. The receipt of income by an individual from the letting of property to a tenant, or multiple tenants, will not typically amount to the carrying on of a business; these activities are generally considered a form of investment rather than a business. As with prior years, the travel expenditure cannot be included in the cost base for calculating your capital gain or capital loss when you sell the property. 32

33 What are the changes in MYOB Tax? As there are still some scenarios where rental travel deductions can be claimed, we haven t removed the label from rental schedules. 33

34 Vacancy fee for foreign acquisitions of residential property Forms affected none Legislative changes The Treasury Laws Amendment (Housing Tax Integrity) Act 2017 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Act 2017 both received Royal Assent on 30 November What are the changes? Foreign owners who submitted an application or notice to the Foreign Investment Review Board (FIRB) from 7:30pm (AEST) 9 May 2017 need to consider the impact of the vacancy fee. The vacancy fee applies to foreign individuals, as well as any companies or trusts held by foreign persons. Foreign persons acquiring a residential property under a new dwelling exemption certificate or a near-new dwelling exemption certificate (held by the developer) approved prior to the time specified, will not be affected. The vacancy fee applies to foreign owners of unoccupied residential property or residential property not genuinely available on the rental/licensing market (with at least 30-day terms), for at least a total of six months (183 days) out of a year (vacancy year). The person occupying the property does not have to be the owner of the property. The vacancy year commences on the owner s initial right to occupy the property (such as settlement). The new rules also require foreign owners to report annually to the Commissioner of taxation in respect of each dwelling, even where there is no liability to the vacancy fee. With the vacancy fee for a foreign owner being based on an individual reporting period, affected persons and entities need to be diligent to ensure that their reporting deadlines under the new regime are being met. Vacancy fee payable The vacancy fee payable will be equivalent to the fee payable for the residential land acquisition application to the FIRB. An acquisition of residential land priced up to $1 million will be expected to incur a FIRB application fee of $5,500. If a fee that would have been payable at 34

35 the time of application of acquisition was waived, the vacancy fee is the lowest fee payable for a residential land acquisition, being $5,500. Purchases covered by an exemption certificate (i.e. new dwelling or near-new dwelling certificates) held by the developer will be assessed as if the purchasers made the acquisition application individually. The effect of which is that the same rates as above apply. Foreign owners of Australian residential property need to submit an annual vacancy fee return within 30 days after the end of vacancy year even where there is no obligation to pay vacancy fees. The ATO will notify the owner of any applicable vacancy fees. Owners should be aware that penalties will apply for non-compliance. What are the changes in MYOB Tax? None. 35

36 International Dealings Schedule (IDS) Forms affected P T C AMIT (ids) Legislative changes The Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 received Royal Assent on 11 December 2015 The Diverted Profit Profits Tax Act received Royal Assent on 4 April What are the changes? The IDS focuses on profit shifting by multinationals through recent, current and prospective legislation arising from diverted profits tax (DPT) and base erosion profit shifting (BEPS). Changes to the IDS will impact small and large multinationals who use their associated foreign entities, potentially shifting their profits out of Australia. The IDS alterations are focused on ensuring substance in the global value chain and greater transparency. The IDS applies to cross-border arrangements. Some of the significant global entities (SGEs) by which the diverted profits tax (DPT) and other base erosion and profit shifting (BEPS) arrangements can apply are represented in market segments that rely on risk assessment using the IDS for subsequent risk modelling and risk filters before any compliance action is pursued. The IDS 2018 form and instructions will reflect new and altered labels for the 2018 tax year. 36

37 What are the changes in MYOB Tax? Head schedule Select Y on labels A F to be directed to the relevant section: 37

38 Section A International related party dealings New question 13f If you answer Y at label A, you ll need to enter amounts in labels C and D. Section B Financial arrangements New question 19a If you answer Y at label A, you ll need to enter amounts in labels B and C. Section C Interests in foreign entities New question 21a If you answer Y at label A, you ll be able to enter amounts in question 23 Specify the amounts in calculation of your attribution income of CFC. 38

39 New question 21b If you answered Y to question 21a, you ll need to fill in item 21b, labels B, C and D: New question 21c If you answer Y at label A, you can fill in labels B, C and D. If you answer N, labels B, C and D will be blocked. New question 21d If you answer Y at label A, you can fill in labels B, C and D. If you answer N, labels B, C and D will be blocked. New question 21e 39

40 Changes to question 23 We ve added 23a Specify the amounts of notional assessable income under the following sections of the ITAA 1936, with Listed countries CFC (Section 385) requiring labels A, B, C and D to be filled. Specified countries CFC (Section 384) requiring labels E, F and G. Other unlisted countries (Sections 384) requiring labels H, I and J. The above amounts are added together at Total Notional Assessable Income at label K. 23b, Specify the amounts of attribution income modifications, with; Listed countries at label A. Specified countries at label B. Other unlisted countries at label C. The above amounts are added together at Total attribution income at label D. 40

41 Changes to question 28 28a Were you a beneficiary of a non-resident trust of did you have an interest in or an entitlement to acquire an interest in, either then income or capital of a non-resident trust during the income year? Y/N 28b Do any of the schedules within PCG 2017/1 apply to your offshore dealings? Y/N If you answer Y to 28a or 28b, fill in the type of hub arrangements that have the highest dollar value of property or services imported to or exported from Australia in labels B to J: 41

42 Changes to question 29 29a Were you a partner in a foreign hybrid limited partnership (FHLP) or a shareholder in a foreign hybrid company (FHC)? Y/N If you answer Y, labels B and C can be filled in. 29b Apart from 29a, did you have any income or expense in connection with any cross-border hybrid entity? Y/N If you answer Y, labels B and C can be filled in. 42

43 Section D Thin capitalisation Changes to question 30 30a Did the thin capitalisation rules affect you? Y/N. If you answer N, go to question 30b If you answer Y, go to question b is new and has three Y/N labels: A 2 million threshold test B 90% asset threshold test C Exception of certain special purpose entities.. If you answer Y to label A, B, or C, go to question 40 in Section E of the IDS. New questions 37 37a Did you choose to recognise an internally generated intangible item under section ? Y/N. If you answer Y, enter an amount in 37b If you answer N, go to question 37c. 37c Did you choose to revalue an intangible asset under section ? Y/N. If you answer Y, enter an amount in 37d. 43

44 Section E Financial Services Entities New questions 40 40a Notional amount of interest under Part IIIB, and label C, Specify the main currency of the notional amount to be borrowed under section 160ZZZ 40b Notional derivative and foreign exchange transactions under Part IIIB Notional amount taken to be paid or received under section 160ZZZE with labels G and H Notional amount taken to be paid or received under section 160ZZZF with labels I and J. 40c Are you a foreign bank or other qualifying financial entity that has elected out of Part IIIB of the ITAA 1936? Y/N. If you answer Y, provide the following information at labels L and M Label L asks the taxpayer to provide average quarterly notional amount taken to be borrowed under section 160ZZZ Label M asks the taxpayer to specify the main currency of the notional amount taken to be borrowed under section 160ZZZ If you answer N, go to question

45 Tax incentives for early stage innovation companies Forms affected I T C F MS Legislative changes The Tax Laws Amendment (Tax Incentives for Innovation) Act 2016, received Royal Assent 5 May The Treasury Laws Amendment (2017 Measures No. 1) Act 2017 received Royal Assent on 4 April What are the changes? The tax incentives provide concessional tax treatment for investments made in a range of innovative start-up companies with high growth potential. The changes provide investors that acquire newly-issued shares in a qualifying Australian early stage innovation company (ESIC) with: A non-refundable carry-forward tax offset equal to 20% of the amount paid for their investment, subject to a maximum cap of $200,000 per year for the investor and their affiliates combined (inclusive of current year and carried forward tax offset amount). A separate investment cap also applies to retail (non-sophisticated) investors A modified CGT treatment for qualifying shares, including an exemption for capital gains on shares continuously held for one to ten years. Any capital losses on shares held for less than ten years must be disregarded. This CGT treatment applies to shares that would have qualified for the tax offset if the maximum cap had not been exceeded, so that an investor is able to disregard capital gains on investments over $1 million An ESIC that issues shares that may give rise to an entitlement to the offset during a financial year must report information about their investors to the Commissioner on an approved form, which is due 31 days after the end of the financial year. Investors (or the partner, or the beneficiary or trustee in certain cases), where the investor is a partnership or trust) will be able to claim a non-refundable carry-forward tax offset, equal to 20% of the amount paid for their qualifying investment in newly issued shares in a qualifying ESIC. The tax offset is capped at a maximum of $200,000 for an investor and their affiliates combined in each year (inclusive of current year and carried forward amounts). For a retail (non-sophisticated) investor, the tax offset is effectively capped at $10,

46 In Tax Time 2017, we built processes to allow the initial claim of the offset. In Tax Time 2018, taxpayers can: include tax offsets carried forward from the previous year and enable pre-population of carried forward amounts where appropriate apply a modified CGT treatment when a CGT event occurs in relation to qualifying shares pre-fill the tax offset based on information received in the ESIC report. 46

47 What are the changes in MYOB Tax? Individuals In T9 Early stage investor, we ve added Tax offset carried forward from previous year at label O: Click label O to open the Early Stage Investor (esi) schedule: 47

48 Company In 23 Early stage investor tax offset, we ve added Tax offset carried forward from a previous year at label R: Click label O to open the Early Stage Investor (esi) schedule: 48

49 Fund and SMSF return In Section D: Income Tax Calculation Statement, we ve added two new labels: Early stage investor tax offset at label D3 Early stage investor tax offset carried forward from a previous year at label D4. Click label D3 or D4 to open the Early Stage Investor (esi) schedule: 49

50 Trusts In question 52 Non-refundable carry forward tax offsets, we ve added Early stage investor tax offset at label I: Click label I to open the Early Stage Investor (esi) schedule: At question 55, we ve added: Early stage investor tax offset at label J Early stage investor tax offset carried forward from previous year at label M. 50

51 Tax incentives for early stage venture capital limited partnerships (ESVCLP) Forms affected I T C F MS Legislative changes The Tax Laws Amendment (Tax Incentives for Innovation) Act 2016, received Royal Assent on 5 May The Treasury Laws Amendment (2017 Measures No. 1) Act 2017 received Royal Assent on 4 April What are the changes? This measure: provides investors in an ESVCLP a non-refundable carry forward tax offset up to 10% of the contributions they made during an income year increases the maximum fund size of an ESVCLP from $100 million to $200 million clarifies existing arrangements, and allows a wider range of investment activities to be made by VCLPs and ESVCLPs. In 2018, the ATO will: add a new label to show the amount of early stage venture capital limited partnership tax offset carried forward from previous year introduce a new CGT exemption code for taxpayers who have capital gains/losses disregarded allow the tax offset carried forward from previous year to be pre-filled in a later year return (individual only). 51

52 What are the changes in MYOB Tax? Individuals In T8 Early stage venture capital limited partnership, we ve added Tax offset carried forward from previous year at label M. Click label M to open the Early Stage Venture Capital limited Partnership (esv) schedule: 52

53 Company In 22 Early stage venture capital limited partnership (ESVCLP) tax offset, we ve added Tax offset carried forward from previous year at label P. Click label M to open the Early Stage Venture Capital Limited Partnership (esv) schedule: 53

54 Fund and SMSF In Section D, question 12 Income tax calculation statement, we ve added two new labels: Early stage venture capital limited partnership tax offset at label D1 Early stage venture capital limited partnership tax offset carried forward from a previous year at label D2. Click label D1 or D2 to open the Early Stage Investor (esi) schedule: 54

55 Trusts In question 52 Non-refundable carry forward tax offsets, we ve added Early stage venture capital limited partnership (ESVCLP) tax offset at label H: Click label H to open the Early Stage Venture Capital Limited Partnership (esv) schedule: 55

56 At item 55 beneficiary 1,2,3, we ve added a new label for Early stage venture capital limited partnership tax offset at label T. At item 55 beneficiary income to which no beneficiary entitled to, we ve added a new label for: Early stage venture capital limited partnership tax offset at label T ESVCLP tax offset carried forward from previous year at label K. 56

57 Junior minerals exploration incentive (JMEI) Forms affected I P T C F MS Legislative changes The Treasury Laws Amendment (Junior Minerals Exploration Incentive) Bill 2017 received Royal Assent on 4 April What are the changes? The introduction of the junior minerals exploration incentive (JMEI) is to provide a tax incentive for junior exploration companies. The JMEI will enable eligible companies to create and issue tax credits, by giving up a portion of their tax losses from greenfields mineral exploration expenditure, which can then be distributed to eligible shareholders. Tax credits can only be generated for new shares issued in that income year. Australian resident shareholders that are issued with a tax credit will be entitled to a refundable tax offset or additional franking credits. The issuing company's carry forward losses will be reduced to reflect the amount of the credits created. Participation The ATO will review the application and advise the company: of the amount of exploration credits the company may be entitled to create if the cap has been reached, that the company is not entitled to any exploration credits This will require the development of a new application form, given the cross-over with the final period of the Exploration Development Incentive. Notification Exploration companies are to report: the amount of exploration expenditure they incurred the amount of capital they raised the amount of tax loss to be converted to exploration credits the amount of credits they intend on issuing. 57

58 This may be done by modifying the existing EDI participation form to create a JMEI participation form. The JMEI is voluntary and companies seeking to participate need to electronically lodge their participation form with the ATO by the due date. The ATO will allocate each eligible entity an exploration credit allocation on a first come, first served basis until the annual exploration credit cap for each income year is exhausted. The JMEI applies from the income year with exploration credits capped at a total of $100 million over a four-year period: $15 million in the income year $25 million in the income year $30 million in the income year $30 million in the income year. JMEI replaces the exploration development incentive that ended on 30 June Excess exploration credit tax Entities are liable for excess exploration credit tax where they issue exploration credits: beyond their maximum exploration credit entitlement in circumstances where they are not permitted to to investors beyond the investors entitlement. Entities are also subject to shortfall interest. 58

59 What are the changes in MYOB Tax? Individual If an individual is an Australian resident for the whole of the income year, they may be entitled to a refundable tax offset equivalent to the amount of exploration credits they have received. If they have received exploration credits from their shareholdings in a greenfields minerals explorer, claim the tax offset by completing the supplementary section of the 2018 tax return. The existing labels created on income tax returns for the EDI will be used to report JMEI offsets and credits. These can be claimed under item T11 in the tax offsets section of the return. Click on P at item T11 to navigate to the Other refundable tax offsets screen: Click on Exploration credits to open the Exploration Development Incentive Credits window: 59

60 Superannuation entity or self-managed superannuation fund A superannuation entity or self-managed superannuation fund (SMSF) is entitled to a refundable tax offset where it has been an Australian resident for the whole income year and has received exploration credits. For a superannuation entity or SMSF that has received exploration credits, the amount of the tax offset is the value of the exploration credits received during the income year. Include that amount at item E4 of the relevant tax return. Corporate tax entity You are not entitled to refundable tax offsets for exploration credits you receive. If you are an Australian resident taxpayer for the whole of the income year, you can recognise amounts of exploration credits received as a franking credit in your franking account and distribute these to your shareholders. 60

61 Trust or partnership Trusts and partnerships are generally unable to directly benefit from exploration credits. However, if you are a trust or partnership, you may provide a statement to your partners or beneficiaries advising of the exploration credits received and the partner s or beneficiary s share of the exploration credits received during the income year (distribution statement). The member's share of the exploration credits received must be the same as the share that they would be entitled to receive of an equivalent franked distribution to the trust or partnership from the same source. You must provide this distribution statement to your eligible members prior to the lodgment of your tax return. The distribution statement must contain the following information for it to be in the approved form: If the trust or partnership were directly issued with exploration credits from the greenfields minerals explorer it must include: the name of the entity (trust or partnership) that is providing the statement the member s share of the amount of exploration credits that were issued to the trust or partnership by the greenfields minerals explorer under Subdivision 418-E of ITAA 1997 for the income year the name and ABN of the greenfields minerals explorer that issued the exploration credits to the trust or partnership a statement that the trust/partnership would, apart from subparagraphs (b)(ii) and (iii), have been entitled to a tax offset under Subdivision 418-B of the ITAA 1997 for the income year in relation to the exploration credit issued to it by the greenfields minerals explorer. If the trust or partnership were indirectly entitled to exploration credits from another trust or partnership it must include: the name of the entity (trust or partnership) that is providing the statement the member s share of the amount of exploration credits under Subdivision 418-E of ITAA 1997 for the income year the name and ABN of the greenfields minerals explorer that issued the exploration credits that flowed indirectly to the entity through one or more trust/partnership a statement that the entity would, apart from subparagraphs (b)(ii) and (iii), have been entitled to a tax offset under Subdivision 418-B of the ITAA 1997 for the income year in relation to the exploration credit that is taken to have been issued to it. In each case, if the trust or partnership is distributing exploration credits from more than one greenfields minerals explorer to a member, the trust or partnership must ensure that the information in the statement it provides to the member (outlined above) are separately itemised for each greenfields minerals explorer. 61

62 If you are a trustee that is liable to tax under subsection 98(1), 98(2), 99(2), or 99(3) of the ITAA 1997, then you may be entitled to a tax offset for the exploration credits received that are not distributed to your members. Trust Return Statement of Distribution: 62

63 Partnership Return Statement of Distribution: 63

64 Country-by-Country reporting: phase 2 Forms affected I P T C F MS Legislative changes The Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 received Royal Assent 11 December What are the changes? Country-by-Country (CbC) reporting is part of a broad suite of measures to combat international tax avoidance through more comprehensive exchanges of information between countries. These measures also provide revised standards for transfer pricing documentation. CbC reporting implements Action 13 of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Action Plan. CbC reporting applies to particular types of significant global entities (SGEs) and consolidated groups with annual incomes of A$1 billion or more and: requires the lodgment of three statements, the CbC report, local file and master file within 12 months after the end of their income tax year Australian entities falling under the CbC reporting regime generally require local file lodging requirement as part of a consolidated group. What are the changes in MYOB Tax? There are no specific CbC changes, however MYOB Tax provides for relevant data capture in the international dealings schedule (IDS). It does not currently cover the preparation of lodgment of the CbC report and associated files. 64

65 Diverted profits tax (DPT) Forms affected none Legislative changes The Treasury Laws Amendment (Combating Multinational Tax Avoidance) Act 2017 received Royal Assent on 4 April What are the changes? Introduced in the budget as part of a package of measures designed to tackle multinational tax avoidance, the diverted profits tax (DPT) aims to provide the ATO with greater powers to deal with taxpayers who transfer profits to offshore related parties using contrived arrangements to avoid Australian tax. The measure also aims to encourage large multinational enterprises to provide sufficient information to the ATO to allow for the timely resolution of tax disputes. The DPT will impose a penalty rate of 40%. The tax rate applies to the amount of an Australian tax benefit if it would be concluded that there was a principal purpose (a lower hurdle than sole or dominant purpose) of obtaining an Australian tax benefit, or both to obtain an Australian tax benefit and reduce foreign tax liabilities. The DPT assessment process differs from current normal assessment processes. It will impose a liability when an assessment is issued by the ATO, require upfront payment of any DPT liability, and put the onus on taxpayers to provide information to the ATO to substantiate why the DPT should not apply during a 12-month period. The DPT: applies only to significant global entities applies to income years that start on or after 1 July 2017 can apply to schemes entered into before 1 July 2017, that produce a tax benefit in an income year starting on or after this date. In broad terms, the new law applies if under the scheme, or in connection with the scheme: the relevant taxpayer has obtained a tax benefit in connection with the scheme in an income year a foreign entity, that is an associate of the relevant taxpayer, entered into or carried out the scheme or is otherwise connected with the scheme the principal purpose, or one of the principal purposes of the scheme, is to obtain an Australian tax benefit or to obtain both an Australian and foreign tax benefit. 65

66 The DPT will not apply (even if the principal purpose test is satisfied) if it is reasonable to conclude that one of the following exemptions applies: Australian income does not exceed A$25 million the sufficient foreign tax test is satisfied, requiring an increase in foreign tax liabilities from the arrangement to be 80% or more of the corresponding reduction in the Australian tax liability the sufficient economic substance test is satisfied, requiring income derived, received or made by each entity connected with the arrangement to reasonably reflect the economic substance of the entity s activities in connection with the arrangements, and having regard to the Organisation for Economic Cooperation and Development s (OECD) transfer pricing guidelines including the BEPS report dealing with Actions 8 10: Aligning Transfer Pricing Outcomes with Value Creation. The DPT will not apply to a relevant taxpayer who is: a managed investment trust a foreign collection investment vehicle with wide membership a foreign entity owned by a foreign government a complying superannuation entity a foreign pension fund. The DPT also encourages multinationals to provide sufficient information to the ATO to allow for timely resolution of tax disputes. What are the changes in MYOB Tax? None. 66

67 CHANGES TO INDIVIDUAL RETURNS

68 Tax changes for individual returns Medicare levy low-income threshold increase Forms affected I (mlv) Legislative changes None. What are the changes? The Medicare levy low-income thresholds for singles, families, seniors and pensioners have been increased for the income year. The threshold increases mean that households will not pay the Medicare levy if their taxable income is below the statutory low-income threshold. What are the changes in MYOB Tax? We ve updated MYOB Tax with the threshold values for : 68

69 Temporary budget repair levy fringe benefit tax changes FBT rate sunset Forms affected I Legislative changes The Tax Laws Amendment (Temporary Budget Repair Levy) Act 2014 and the Fringe Benefits Tax Amendment (Temporary Budget Repair Levy) Act 2014 received Royal Assent on 25 June What are the changes? The temporary budget repair levy (TBRL) ceased to apply after 30 June 2017 so the assessment year will no longer include the additional 2% TBRL for income over $180,000. Under the TBRL scheme, there was an additional 2% applied to fringe benefits tax from 1 April 2015 until 31 March What are the changes in MYOB Tax? We ve updated MYOB Tax to reverse the FBT increase, the changes include: the FBT rate has been reduced from 49% to 47% tax rates have been updated the FBT gross-up rates (type 1 and type 2) have been changed to the reduced FBT rate the FBT reduction factor applied to reportable fringe benefits amounts for non-exempt employers for adjusted taxable income (ATI) has been changed from 0.51 to 0.53 tax rates and parameter tables have been updated the 2018 master tax rate tables for individuals and trustees have been updated all references to the TBRL have been removed. 69

70 FBT changes and income tests for tax offsets Forms affected I Legislative changes The Budget Savings (Omnibus) Act 2016 Schedule 15 Fringe Benefits received Royal Assent on 16 September The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November What are the changes? Changes to FBT will have an impact the way several income tax tests are conducted. From 1 July 2017, the reportable fringe benefits amount (RFBA) received from employers who are not exempt from fringe benefits tax under section 57A of the Fringe Benefits Tax Assessment Act 1986 will not be adjusted down when calculating entitlement to several tax offsets. Section 57A references individuals performing duties for registered public benevolent institutions, registered health promotion charities, some hospitals and public ambulance services. There is no change to the treatment of RFBA received from employers who are exempt from FBT under section 57A of the FBT Assessment Act 1986, for example, hospitals. From 1 July 2017, the RFBA adjustment (49%) is removed from the calculation of adjusted taxable income (ATI). ATI is used in the calculation of many entitlements including: Net medical expenses tax offset (NMETO) Dependant (invalid and invalid carer) tax offset (DICTO) Dependant child for Medicare levy purposes Low-income superannuation tax offset (LISTO) The RFBA adjustment (49%) is also removed from the calculation of rebate income, used to determine eligibility for seniors and pensioners tax offset. 70

71 What are the changes in MYOB Tax? In the individual income tax return, the reportable fringe benefits amounts will not be adjusted down when performing the calculations in the ATI and rebate income at: Item IT1, label W Employers not exempt from FBT under section 57A of the FBTAA 1986 Spouse details section, label S Employers not exempt from FBT under section 57A of the FBTAA

72 Allocation of PAYG credits and payments received against overseas repayment levies Forms affected none Legislative changes The Education Legislation Amendment (Overseas Debt Recovery) Act 2015 and the Student Loans (Overseas Debtors Repayment Levy) Act 2015 received Royal Assent on 26 November What are the changes? Australians who have a Higher Education Loan Programme (HELP) debt and are residing overseas will be required to make repayments against their debt. This initiative has been further extended to Trade Support Loan (TSL) debtors. Collection and recovery of these repayments will be based on the current regime existing for those living in Australia. That is, an income-contingent repayment (known as an overseas levy) made through the tax system. Complimenting this change, PAYGW credits will be applied to income contingent loan amounts before being applied against other non-rba amounts (including income tax) of the entity. Under these changes, the first repayment against any HELP debt and/or TSL will start on 1 July It will be based on worldwide income for the Australian income year (that is, from 1 July 2016 to 30 June 2017). In addition, a taxpayer will be required to submit an overseas travel notification if they meet certain criteria. Similar to a taxpayer who is living and working in Australia, if a taxpayer lives and works overseas and earns worldwide income that exceeds the minimum HELP and TSL repayment thresholds, they will be required to make repayments against their loan. The two main changes the Australian government has introduced means you must: update your contact details and submit an overseas travel notification if you have an intention to, or already reside overseas, for 183 days or more in any 12 months lodge your worldwide income or a non-lodgment advice. These changes apply to new and existing HELP and TSL debts. 72

73 After a taxpayer has reported their worldwide income, they will receive a notice confirming: how much they owe or will be refunded the due date for payment. HELP and TSL debt will continue to be indexed each year until it is paid. A taxpayer can make additional voluntary repayments from overseas at any time to reduce the balance of their debt. These repayments will not reduce any compulsory repayment or overseas levy obligations they may have. What are the changes in MYOB Tax? No changes to MYOB Tax as payment is already being calculated in the [F4] estimate. 73

74 Cost of managing tax affairs Forms affected I Legislative changes None. What are the changes? Individuals can claim a deduction for the cost of managing tax affairs at label D10 on the individual tax return (ITR). Amongst other things, label D10 includes deductible amounts for ATO interest charges and litigation costs. The D10 Cost of Managing Tax Affairs item will be split into three sub-components to provide a more accurate representation of what is being claimed. ATO interest can be either assessable or deductible: assessable if the ATO pays interest, such as interest on over payment (IOP) or an amount of interest imposed is subsequently recouped or remitted deductible if interest such as general interest charge (GIC) has been applied. 74

75 What are the changes in MYOB Tax? D10 Cost of managing tax affairs D10 has been split into three separate labels: N Interest charged by the ATO L Litigation costs M Other expenses incurred in managing your tax affairs 24 Other Income Item 24 has been split into three separate labels: Y Category 1 income X Category 2 income (ATO interest) V Category 3 income 75

76 Tax deductions for personal superannuation contributions Forms affected I (psc) Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 received Royal Assent on 29 November What are the changes? Before 1 July 2017, an income tax deduction for personal super contributions was only available to people who earned less than 10% of their income from salary or wages. From 1 July 2017, the 10% rule is removed. This allows most Australians aged under 75 (including those aged who meet the work test) to claim an income tax deduction for any personal super contributions made into an eligible super fund. These amounts will count towards the individual s concessional contributions cap, and be subject to 15% contributions tax. Individuals will still be required to lodge a notice of intent (NOI) to claim the deduction with their super fund or retirement savings provider. This notice needs to be lodged before they lodge their income tax return. Individuals must decide the amount they are going to deduct before lodging the NOI. They can only claim a deduction for the amount on their notice. Members of Commonwealth public sector superannuation schemes, untaxed funds such as a constitutionally protected fund (CPF), or certain funds that offer defined benefit interests, will not be eligible to claim a deduction for contributions made to these funds. Instead, if a member wants to claim a deduction, they may choose to make their contribution to another eligible superannuation fund. 76

77 What are the changes in MYOB Tax? We ve removed the 10% maximum earnings condition for claiming a personal superannuation deduction (item D12 on the individual tax return). In item D12, click label H to open the Personal superannuation contributions schedule (psc). The 2017 psc schedule has a question confirming that superannuation contribution deductions are less than 10%: 77

78 We ve removed the question confirming that superannuation contribution deductions are less than 10% from the Personal superannuation contributions 2018 (psc) schedule: Ensure that individuals know how claiming the deduction will impact their super contribution caps. From 1 July 2017, the concessional contribution (CC) cap has been reduced to $25,000. The CC cap includes any employer contributions, salary sacrifice and tax-deductible contributions 78

79 Tax offset for spouse contributions increase in income threshold Forms affected I (ssc) Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November What are the changes? The Tax offset for spouse contributions increase in income threshold. From 1 July 2017, the 18% tax offset of up to $540 will be available for any individual, whether married or de facto, contributing to the super account of a spouse whose income is up to $37,000. This is an increase from the previous income threshold of $10,800. The offset is gradually reduced for income above this level and completely phases out at an income above $40,000. Additionally, an individual will not be entitled to the tax offset when: the spouse receiving the contribution has exceeded their non-concessional contributions cap for the relevant financial year the spouse receiving the contribution has a total superannuation balance equal to or more than the general transfer balance cap ($1.6 million for ), immediately before the start of the financial year in which the contribution was made. 79

80 What are the changes in MYOB Tax? Item T3 Superannuation Contributions on behalf of your spouse has been updated with the new income thresholds and the additional eligibility criteria with respect to the spouse s non-concessional contributions cap and total superannuation balance. We ve added two boxes to the 2018 Spouse Superannuation Contributions Offset (ssc) schedule to confirm the additional eligibility criteria. 80

81 Transfer balance cap Forms affected I (pen) Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November What are the changes? A cap has been placed on the amount of capital that can be transferred from concessionally taxed accumulation phase accounts to tax-free retirement phase accounts. It applied from 1 July 2017, and the measure is attempting to limit the extent to which the retirement phase interests of high wealth individuals attract an earnings tax exemption. The cap is $1.6 million for the financial year. The cap will be indexed in $100,000 increments in line with the CPI. Individuals who have previously moved an amount into retirement phase will receive a proportion of the indexation amount. If an individual exceeds the transfer balance cap, they generally need to commute the excess amount back to the accumulation phase. They will then be subject to excess transfer balance tax on the excess transfer balance earnings that accrued while the person exceeded their transfer balance cap. However, in the following situations, it is known as a capped defined benefit income stream: where a member of a fund has a defined benefit income stream where excess cannot be commuted, and the member is aged 60 or over, or is in receipt of a reversionary income stream where the deceased was 60 or over at the time of death. Subsequent tax treatments will apply from 1 July 2017, where the total of a taxpayer s tax-free component, taxed element, and untaxed element is above $100,000 per year will be concessionally taxed. For taxed and tax-free components, half of the income above the individual defined benefit cap will be included in the recipient s assessable income and taxed at their marginal tax rate. For untaxed components, the tax offset will be limited to their cap, and will not apply to untaxed-sourced benefits above the cap. for combined taxed sourced and untaxed component income, the taxed portion is applied to the cap before the untaxed portion. 81

82 What are the changes in MYOB Tax? Item 7 Australian annuities and superannuation income streams We ve added label M Assessable amount from capped defined benefit income stream to item 7 to cater for the changes to the taxation of defined benefit income streams. Item T2 Australian superannuation income stream Item T2 will remain unchanged. However, instructions will be updated to limit the amount of tax offset on the untaxed element. The maximum amount that an individual can claim for the financial year is 10% of their cap on untaxed elements. Click label S to open the Annuity and Super Income Stream Offset (pen) schedule. 82

83 Reporting taxable government grants and specified payments Forms affected I (oly) Legislative changes Subdivision 396-B in Schedule 1 to the Taxation Administration Act What are the changes? Reporting of government grants and payments is covered by table items 1 and 2 in section of Schedule 1 to the Taxation Administration Act New third-party reporting legislation is in place that requires government entities to report on grants they pay to entities with an ABN and payments wholly or partly for the supply of services. The annual report from providers of the taxable government grants and specified payments to the ATO is due for lodgment by 28th August 2018, covering 1 July 2017 to 30 June

84 What are the changes in MYOB Tax? MYOB s Import from Tax Office pre-filled report will be updated in a later release, to include any taxable grants and specified payments to be included at item 24, label V Other Income - Category 3. 84

85 85

86 CHANGES TO COMPANY RETURNS

87 Tax changes for company returns Tax rate reduction for companies who qualify as base rate entities Forms affected C Legislative changes (a) The Treasury Laws Amendment (Enterprise Tax Plan) Act 2017 received Royal Assent on 19 May What are the changes? The corporate tax rate will be reduced to 27.5% (from 30%) for entities with an aggregated turnover of less than: $25 million for the income year $50 million for the income year Companies will self-assess their eligibility for the lower corporate tax rate. From , a company entity eligible for the lower corporate tax rate will be referred to as a base rate entity (BRE). The corporate tax rate will be further reduced for BREs: income year 27% income year 26% income year 25% 87

88 What are the changes in MYOB Tax? Company tax rates The tabs Non-profit, RSA, PDF and Credit Unions reflect the changes to the base rate entity. Non-profit companies Retirement savings accounts (RSA) 88

89 Life assurance companies Pooled development funds 89

90 Credit unions 90

91 Changes to the front cover On the front cover section of the company tax return, at item 3 Status of Company, we ve added the question Is the taxpayer a Base Rate Entity? Y/N. The eligibility test has been updated to check that base rate entity aggregated turnover threshold is $25 million for the income year. Press [Enter] to open the new Base Rate Entity - Eligibility Tests worksheet. New worksheet: Base Rate Entity Eligibility Tests Y to both questions to qualify as a BRE. If you press [Alt+S] at question 2 the Aggregate Turnover Worksheet opens. 91

92 Aggregate Turnover Worksheet When you ve completed and saved this worksheet, if the Total Aggregated Turnover is less than $25 million answer Y to question 2 on the Base Rate Entity - Eligibility Test worksheet. If it s more than $25 million, answer N. Calculation statement gross tax calculation: Where BRE eligibility is established, the auto-calculation of tax on taxable income calculates at the reduced corporate tax rate for small business entities of 27.5%. In the 2018 year, this applies to all annual turnover amounts under $25 million. For example, if we assume a taxable income of $10 million: Taxable Income $10 million X = $2,750,

93 Landcare and water facility offset brought forward from prior year The landcare and water facility offset is a non-refundable carry forward offset that can be found at label D in the Calculation statement. Click label D to open the Non-refundable carry forward tax offsets window. 93

94 Click Landcare and water facility tax offset brought forward from prior years to open the Water Facility Offset worksheet: The worksheet contains confirmation that the entity is a base rate entity, and the 27.5% rate applies. 94

95 Maximum franking credits To work out the company tax rate you use when franking distributions, assume the aggregated turnover will be the same as the prior income year. If you were formerly a small business entity and have already issued your distributions based on the 30% company tax rate, notify your members of the correct dividend and franking credit amounts based on the 27.5% company tax rate. You can do this by sending a letter or to your members, or a revised distribution statement. You also need to ensure the correct amounts are reflected in your franking account. For more information, refer to PCG 2017/D7 Enterprise Tax Plan: small business over-franking in income year because of tax rate change. 95

96 Non-refundable R&D tax offset c/f from previous year We ve updated the R&D Calculator, validations and instructions for companies to use the 27.5% tax rate in their calculations when they are a BRE. Click label D Non-refundable R&D tax offset carried forward to next year, to open the Non-refundable R&D tax offset carried forward from previous year worksheet. If the company is to be treated as a BRE, tick the Base rate entity checkbox. 96

97 Extension of tax rate reduction Legislative changes The Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017 had its first Senate reading on 12 February This bill has not been passed yet, however the expectation is that it will be passed into law sometime in June What are the changes? Base rate entities The bill will alter the definition of what a base rate entity is from onwards by replacing the existing carrying on a business test with a passive income test. Under the passive income test, companies that are generating more than 80% passive income will not be eligible for the lower corporate tax rate. Passive income includes items such as: interest royalties rent non-portfolio dividends non-share dividends net capital gains. In general, the following entities will still be considered BREs: non-profit companies pooled development funds retirement savings account providers public trading trust. What are the changes in MYOB Tax? None. 97

98 Tax rate reductions franking credits Legislative changes The Treasury Laws Amendment (Enterprise Tax Plan 2) Bill 2017 had its first Senate reading on 12 February This bill has not been passed yet. What are the changes? If the bill is passed, it would result in the corporate tax rates being gradually reduced. Franking credits The maximum franking credit that can be allocated to a corporate frankable distribution will be based on that entity s applicable corporate tax rate for imputation purposes (CTRFIP). In simple terms this means that a company must frank their distributions for the current year based on last year s income. For the income year, the corporate tax rate for imputation purposes will be: 27.5% if the company was a BRE last year, or is a BRE its first year of business 30%, but a franking credit rate for imputation purposes of 27.5% 30% for all other companies. Substituted accounting periods For a small business company with an early balancing substituted accounting period, the reduced company tax rate will not apply to 2018 because its financial year started before 1 July If the company is a standard or late balancer, the reduced company tax rate will apply to your 2018 income year because it started on or after 1 July What are the changes in MYOB Tax? None. 98

99 TAX CHANGES FOR SUPERANNUATION & SELF MANAGED SUPER FUNDS

100 Tax changes for superannuation and SMSFs Strengthening the integrity of income streams Forms affected F MS (xf) Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November The Treasury Laws Amendment (2017 Measures No. 2) Act 2017: superannuation reform package amending provisions received Royal Assent on 22 June What are the changes? Transition to retirement income streams (TRIS) allows people who have reached their preservation age to have access to their superannuation benefits without having to retire or leave their job. A TRIS is essentially an account-based pension from which lump sum payments can only be made in limited circumstances. It also has a maximum annual payment limit. Like other income streams where a fund is liable to make TRIS payments, some or all of the fund's income and capital gains may be treated as exempt current pension income (ECPI). TRIS were intended to help older workers transition to retirement through reducing their working hours and supplementing their lost salary income with a superannuation income stream. In practice, TRIS have been used to reduce tax (including through the pension phase earning tax exemption) without a reduction in working hours of recipients. The intent of these changes is to ensure that TRIS were not accessed primarily for their tax advantage, and still meet the objective of supporting people. 100

101 Changes as at 1 July 2017 include: The tax-exempt status of income from assets supporting a TRIS that is not in retirement phase has been removed. A TRIS is not in the retirement phase when the member has not reached age 65 or has not notified their fund that they have met any of the retirement, permanent incapacity or terminal illness conditions of release. Earnings from assets supporting a TRIS not in the retirement phase will now be assessable income of the fund and will be taxed at 15% regardless of the date the TRIS commenced Individuals will no longer be allowed to treat certain superannuation income stream payments as lump sums for tax purposes which currently makes them tax-free up to the low rate cap ($195,000). Full or partial commutations of superannuation income streams will be treated as superannuation lump sums. Lump sum payments will not count towards an individual s annual minimum pension payments. Superannuation funds and SMSFs must ensure that TRIS payments being accessed by the taxpayer meet the general TRIS legislative intent: need to ensure that the earnings on assets supporting a TRIS that is not in the retirement phase are not treated as tax exempt they must be taxed at 15% treat costs as deductible where the TRIS is not eligible for transitional purposes identify and report all TRIS accounts in accumulation phase to the ATO via: Member account attribute service (MAAS) SMSF annual return. 101

102 What are the changes in MYOB Tax? Fund return We ve made some instructional changes to provide details on the new legislative requirements that removes the tax-exempt status of earnings that support a TRIS, when the TRIS is not in the retirement phase. The areas changed are: Fund return: section B label Y SMSF return: section A question 10 SMSF return: section B label Y In the SMSF return in sections F & G Member and supplementary member information, we have added a new field TRIS Count to record the number of TRIS accounts in accumulation phase. 102

103 Removal of the existing anti-detriment provisions Forms affected F MS Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 received Royal Asset on 29 November 2016 What are the changes? Changes will remove the existing anti-detriment provision to ensure that there is a consistent treatment of lump sum death benefits across all superannuation. The ability for funds to claim a deduction for additional payments to eligible dependants when a death benefit is paid has been removed. The anti-detriment provision can result in a refund of a member s lifetime superannuation contribution tax payments into an estate, where the beneficiary is the dependant of the member. This measure commenced on 1 July Funds may include an anti-detriment payment and claim a tax deduction for it as part of death benefit if a member dies on or before 30 June The funds have until 30 June 2019 to pay the benefit. Funds cannot claim a deduction for an anti-detriment payment as part of a death benefit if the member dies on or after 1 July Currently, funds can pay an additional amount (the anti-detriment payment) to refund the 15% contributions tax that has been paid by the deceased member over their lifetime. The fund can then claim a deduction related to this amount in their income tax return. The amendments repeal section (the anti-detriment deduction). This section allowed complying superannuation and approved deposit funds an income tax deduction if a lump sum superannuation benefit paid to benefit the spouse, former spouse or children of a member following a member s death was greater than it would otherwise have been to compensate for tax payable on the contributions to the fund made for the member over the member s lifetime. [Schedule 9, item 3, section ]. The amendments also repeal section which provided an equivalent deduction to life insurers under the same circumstances. [Schedule 9, item 3, section ]. 103

104 The repeal applies in relation to lump sums that are paid because of the death of a member where that member died on or after 1 July However, from 1 July 2019, it applies to all benefits paid after this time, irrespective of whether the member died before 1 July [Schedule 9, item 5]. This ensures that delays in the payment of a lump sum in respect of the death of a member in the first two years after the repeal do not result in differences in income tax treatment. However, limiting the transition period to two years avoids uncertainty and compliance costs that would result from indefinitely retaining the income tax deduction in respect of members that pass away prior to 1 July 2017 where payment of lump sums to beneficiaries is significantly delayed. 104

105 What are the changes in MYOB Tax? There are no changes to the income tax returns until , when the deduction label will be removed. We ve made some instructional changes to provide details on the new legislative requirements that removes the ability for the anti-detriment deduction to be claimed where a member dies on or after 1 July 2017 in: Fund return: section C SMSF return: section G. 105

106 Total superannuation balance Forms affected MS (xf) Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 received Royal Assent on 29 November What are the changes? Multiple superannuation changes that will be dependent on an individual s total superannuation balance (TSB). The TSB will be a 30 June balance amount reported by funds each financial year. The TSB will be used to determine eligibility for: the unused concessional contributions cap carry-forward the non-concessional contributions cap and the two- or three-year bring-forward period the government co-contribution the tax offset for spouse contributions SMSF or small APRA funds to determine whether they can use the segregated assets method to calculate exempt current pension income. Balances of accumulation and retirement phase accounts will need to be reported by funds to enable the ATO to determine an individual s total superannuation balance (TSB). 106

107 What are the changes in MYOB Tax? APRA funds There are no changes necessary for fund returns, however the legislation affects: where the amount reported at the existing account balance label on the MCS: if the total amount of the superannuation benefits that would become payable if the individual voluntarily caused the interest to end at that time there would be no additional reporting Does not equal the definition of accumulation phase value or retirement phase value (i.e. does not include the realised value) then additional reporting is required to ensure the correct calculation of TSB this additional reporting must be submitted on the Transfer Balance Account Report (TBAR) at or just prior to lodging the MCS. the data required: Accumulation phase value Retirement phase value. For capped defined benefit income streams (CDBIS) starting on or after 1 July 2017 or CDBIS (other than a market linked CDBIS) that was in existence prior to 1 July 2017, the events reported on the Transfer Balance Account Report (TBAR) will be used to calculate an individual s TSB. These events are required to be reported within 10 working days from the end of the month in which the event occurred. 107

108 SMSF returns New labels will form part of the SMSF annual return from to allow the correct calculation of TSB. This is due to the existing closing account balance not differentiating accounts and potentially not including the disposal/realisation costs. Sections F and G Member and Supplementary member information Three new labels make up the total of label S Closing Account Balance: S1 Accumulation phase account balance S2 Retirement phase account balance Non CDBIS S3 Retirement phase account balance CDBIS Two new optional labels have been added to be used if the amounts reported in the mandatory fields do not equal the definition of accumulation phase value or retirement phase value i.e. does not include the realised value: X1 Accumulation phase value X2 Retirement phase value 108

109 Transfer balance cap Forms affected F MS (bw) (cgt) Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November What are the changes? A cap has been placed on the amount of capital that can be transferred from concessionally taxed accumulation phase accounts to tax-free retirement phase accounts. It applied from 1 July 2017 and the measure is attempting to limit the extent to which the retirement phase interests of high wealth individuals attract an earnings tax exemption. The cap is $1.6 million for the financial year. The cap will be indexed in $100,000 increments in line with the CPI. Individuals who have previously moved an amount into retirement phase will receive a proportion of the indexation amount. If an individual exceeds the transfer balance cap they generally need to commute the excess amount back to the accumulation phase. They will then be subject to excess transfer balance tax on the excess transfer balance earnings that accrued while the person exceeded their cap. However, where a member of a fund has a defined benefit income stream where excess cannot be commuted, and the member is aged 60 or over or is in is in receipt of a reversionary income stream where the deceased was 60 or over at the time of death. This is now known as a capped defined benefit income stream. Tax will apply from 1 July 2017 where the total of a taxpayer s tax-free component, taxed element and untaxed element is above $100,000 per year: taxed source (tax-free component plus the taxed element), half of the income above the individual defined benefit cap will be included in the recipient s assessable income and taxed at their marginal tax rate untaxed defined benefit income, the tax offset will be limited to their cap combination of taxed sourced and untaxed component income, the taxed portion is applied to the cap before the untaxed portion. CGT relief was also provided in certain circumstances for superannuation funds. Where a fund decided to use the CGT relief, funds were required to notify the Commissioner on the approved form ( CGT schedule) and lodge the schedule prior to the lodgement date of the fund s Income tax return for the year. 109

110 For the year where the fund has notified the Commissioner that they have a deferred notional gain amount in their 2017 CGT schedule, funds will need to report that the deferred notional gain has been realised. 110

111 What are the changes in MYOB Tax? We ve removed item 8, labels F and G from the CGT schedule as funds cannot elect to apply the deferral for the 1 July 2017 financial year onwards CGT Schedule (BW) 2018 CGT Schedule (BW) 111

112 At item 1, we ve added label S Amount of capital gain previously deferred under transitional CGT relief for superannuation funds: 112

113 SUPERANNUATION CHANGES FROM 1 JULY 2017

114 Superannuation changes from 1 July 2017 Concessional contributions cap reduction Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November What are the changes? The government lowered the annual cap on concessional (pre-tax) contributions to $25,000 for the financial year. There is no longer an age-related cap. For defined benefit fund (DBF) members, all defined benefit contributions will be included in the concessional cap from year onwards. The timeframe and process to release amounts from superannuation has also changed for concessional contributions. Reporting: Member contributions statement (MCS) Notional tax contributions (NTC) label no change required to the reported amount Constitutionally protected funds (CPF) need to determine if they are required to report notional taxed contributions at this label Defined benefit contributions (DBC) label no change required to the reported amount. The reported amount will continue to capture all defined benefit contributions. Will now be used for both division 293 tax and concessional contributions cap calculation. CPF need to determine if they are required to report DBC at this label Where the NTC amount reported has been capped at the concessional contributions cap amount on the MCS, and the DBC label does not equal the uncapped NTC amount, additional reporting of the uncapped NTC amount is required on the transfer balance account report (TBAR). If the uncapped NTC amount exceeds $25,000 and a TBAR is not submitted with an NTC amount, it will be assumed that the client s true uncapped NTC amount equals the DBC label amount. 114

115 Transfer balance account report (TBAR) When required, report uncapped NTC amounts on transfer balance account report just prior to or at the time of lodging MCS. Refer to the transfer balance account electronic reporting specifications for further information. Member account attribute service (MAAS) Where an account is eligible for grandfathering for excess concessional contributions purposes, this information must be reported on the MAAS by selecting Y in the relevant field. The ATO will use this data to apply specific capping to concessional contributions. Releasing money New streamlined release authorities cover the process to release money for concessional contributions. What are the changes in MYOB Tax? None. 115

116 Non-concessional contributions cap reduction Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November What are the changes? The annual non-concessional contributions cap has been lowered to $100,000 (from $180,000) for Non-concessional contributions made by individuals with a total superannuation balance (TSB) of more than the general transfer balance cap ($1.6 million in ) will be in excess. Individuals under age 65 will generally be eligible to bring forward 2 years of non-concessional contributions ($300,000 over 3 years). An individual s TSB on the day prior to the period will determine the bring forward amount that can be triggered. A TSB of $1.4 million or above and below $1.5 million limits the bring forward amount ($200,000 over 2 years). The timeframe and process to release amounts from superannuation has also changed for non-concessional contributions. What are the changes in MYOB Tax? None. 116

117 Five-year carry forward of concessional contribution cap Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November What are the changes? From 1 July 2018, individuals with a total superannuation balance less than $500,000 can make catch-up concessional contributions. Individuals will be able to access their unused concessional contribution cap on a rolling basis for five years. Amounts that have not been used after five years will expire. The financial year will be the first year that a concessional cap will be increased by unused concessional contributions from the financial year. Existing fund reporting of concessional contributions will be used to determine whether unused concessional amounts exist for an individual for a financial year. What are the changes in MYOB Tax? None. 117

118 First home super saver scheme (FHSS) Legislative changes The Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Act 2017 and the First Home Super Saver Tax Act 2017 received Royal Assent on 13 November What are the changes? The FHSS scheme allows a taxpayer to save money for their first home within their superannuation fund. This will help first home buyers save faster with the concessional tax treatment within super. From 1 July 2017 a taxpayer can make voluntary contributions into their superannuation fund under the following conditions: concessional contributions (including salary sacrifice) is taxed at 15% non-concessional contributions all contributions are subject to existing superannuation contribution caps contributions can be made to multiple funds contributions to defined benefit funds or constitutionally protected funds are not eligible for FHSS. Note: FHSS is a scheme to access funds and not an account. From 1 July 2018 the voluntary contributions together with the associated earnings can be released to assist with the purchase of a first home. First home super saver scheme (FHSS) releases are based on application and are subject to the following: the maximum FHSS release amount outlined in the FHSS determination there is a limit of $15,000 against contributions for any one year (together with earnings) the maximum FHSS withdrawal is $30,000 (together with earnings) First-in first-out processing and non-concessional contributions take precedence a single FHSS release application restriction FHSS releases are subject to ATO withholding and will be taxed at the taxpayers marginal rate (including Medicare) less a 30% tax offset a catch for some taxpayers may be the allocation of FHSS funds against other commonwealth debt before release an ATO service processing time of up to 12 working days will apply the fund may also apply additional fees or changes 118

119 a FHSS release does not affect the calculation of concessional or non-concessional contributions for cap determination purposes for the relevant year unused FHSS release amounts must be repaid and are subject to a 20% FHSS tax. What are the changes in MYOB Tax? None. 119

120 Division 293 threshold reduction Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November What are the changes? From 1 July 2017, the division 293 income threshold for has been reduced to $250,000 (down from $300,000). High-income earners pay tax on their concessional superannuation contributions at 30% above this threshold. What are the changes in MYOB Tax? MYOB Tax calculators have been changed to reflect the new threshold value. 120

121 Streamlining superannuation release authorities Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 received Royal Assent on 29 November What are the changes? The ATO have introduced additional streamlining of superannuation release authorities with electronic forms processing on the portal. These changes move processing to a single combined approach and have a variable implementation impact financial year onwards Excess concessional contributions determinations and amended determinations Excess non-concessional contributions determinations and amended determinations Excess non-concessional contributions tax and amended assessments financial year onwards Division 293 due and payable tax assessments and amended assessments Division 293 deferred debt assessments and amended assessments financial year onwards First home super saver scheme What are the changes in MYOB Tax? None. 121

122 Innovative retirement income stream products Legislative changes The Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 received Royal Assent on 29 November What are the changes? From 1 July 2017, the government has removed tax barriers to the development of innovative retirement income stream products by extending the earnings tax exemption to new lifetime products such as deferred products and group self-annuities, as well as providing a streamlined process for product providers to deal with all relevant government entities when developing a new product. The intent of the measure is to provide a greater choice and flexibility for retirees to enhance their standard of living in retirement. The standards and definitions of these innovative retirement income stream products are set out in regulation 1.06A of the Superannuation Industry (Supervision) Regulations Information for fund managers Funds are to advise the ATO of all innovative income stream products using the member account attribute service (MAAS). These products need to be reported in the same way as other superannuation products in relation to: total superannuation balance $1.6 million transfer balance cap contribution caps (concessional and non-concessional). This reporting will include the: value of each account in accumulation phase as at 30 June each year value of annuity/pension account for transfer balance cap purposes at the time the account becomes eligible for the earnings tax exemption. What are the changes in MYOB Tax? None. 122

123 BUDGET COMMENTARY

124 Budget commentary Individuals A new seven-year personal income tax plan This will be implemented in three steps: Step 1 Low and middle-income tax offset to be introduced A low and middle-income tax offset (LMITO) will be introduced as a non-refundable tax offset of up to $530 per year, to resident low and middle-income taxpayers from to The LMITO will provide a benefit of up to $200 for taxpayers with taxable income of $37,000 or less. For taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of three cents per dollar to the maximum benefit of $530 Taxable incomes from $48,000 to $90,000 will be eligible for the maximum benefit of $530 Taxable incomes from $90,001 to $125,333, the offset will phase out at a rate of 1.5 cents per dollar. The LMITO will be received as a lump sum on assessment after an individual lodges their tax return. The benefit of the LMITO is in addition to the existing low-income tax offset. 124

125 Step 2 Bracket creep relief for middle-income taxpayers Middle-income taxpayers will be provided relief for bracket creep in phases: from 1 July 2018, the top 32.5% threshold will increase from $87,000 to $90,000 from 1 July 2022, the low-income tax offset will increase from $445 to $645, and the 19% bracket will be increased from $37,000 to $41,000 to lock in the benefits of the LMITO in Step 1 the increased low-income tax offset will be withdrawn at a rate of 6.5 cents per dollar for incomes between $37,000 and $41,000, and at a rate of 1.5 cents per dollar for incomes between $41,000 and $66,667 from 1 July 2022, the top 32.5% threshold of the 32.5% bracket will be further increased from $90,000 to $120,000. Step 3 Removing the 37% personal income tax bracket The 37% tax bracket will be removed from 1 July From 1 July 2024, the 32.5% tax bracket threshold will increase from $120,000 to $200,000. Taxpayers will pay the top marginal tax rate of 45%for taxable incomes over $200,000, and the 32.5% bracket will apply to taxable incomes of $41,001 to $200,000. This is illustrated in the table below: 125

126 Medicare levy low income thresholds to increase The Medicare levy low-income thresholds for singles, families, seniors, and pensioners will be increased from the income year: Retaining the Medicare levy at 2% The proposed increase to the Medicare levy from 2% to 2.5% of taxable income from 1 July 2019 will not go ahead. Consequential changes to other tax rates that are linked to the top personal income tax rate, such as the fringe benefits tax rate, will also not go ahead. Income tax exemption for certain veteran payments Supplementary amounts paid to a veteran, and full payments made to the spouse or partner of a veteran who dies, are exempt from income tax from 1 May License schemes to license an individual s fame or image targeted From 1 July 2019, all remuneration (including payments and non-cash benefits) provided for the commercial exploitation of a person s fame or image will be included in the assessable income of that individual. High-profile individuals (such as sportspeople and actors) can currently license their fame or image to another entity such as a related company or trust. Income for the use of their fame or image goes to the entity that holds the licence. This creates opportunities to take advantage of different tax treatments and facilitates misreporting and incorrect tax outcomes. 126

127 Businesses R&D tax incentive changes The calculation for entities claiming the R&D tax incentive will change for income years beginning on or after 1 July Also, a maximum cash refund for smaller R&D claimants will be capped at $4 million per financial year. A smaller R&D claimant is an entity with aggregated annual turnover below $20 million. The changes for calculating the R&D tax incentive are based around an R&D intensity percentage for each entity. The R&D intensity percentage is based on the amount of R&D-related expenditure as a percentage of total company expenditure. The lower the R&D intensity percentage for the entity, the lower the maximum available tax offset. Currently there is a limit on which a company can claim the accelerated rates for the R&D tax incentive. Above this limit, the R&D tax incentive can still be claimed but only at the entity's corporate tax rate. Also, the maximum eligible expenditure to get the concessional rates will rise from $100 million per entity per year to $150 million. Companies with annual turnover above $20 million Currently A 38.5% non-refundable tax offset is available with a minimum eligible R&D expenditure of $20,000 per year. Proposed Four levels of non-refundable tax offset based on an R&D intensity percentage and the entity's corporate tax rate. 40% or 42.5% offset if more than 10% of total expenditure relates to R&D 36.5% or 39% offset if R&D intensity percentage is between 5% and 10% 34% or 36.5% offset if R&D intensity percentage is between 2% and 5% 31.5% or 34% offset if R&D intensity percentage is between 0% and 2%. 127

128 Companies with annual turnover less than $20 million. Currently A 43.5% refundable tax offset is available with a minimum eligible R&D expenditure of $20,000 per year. Proposed A refundable tax offset of 13.5% percentage points above the entity's corporate tax rate. This will mean no change for some companies as the refundable tax offset will remain 43.5%. However, base rate entities that have a lower corporate tax rate of 27.5% will now have a maximum refundable tax offset of 41%. Also, it is proposed that the maximum cash refund available is $4 million. Any additional refunds past this amount can be carried forward to later income years. $20,000 immediate asset write-off extended Businesses with an aggregated turnover of less than $10 million will continue to have access to the $20,000 instant asset write-off for another 12 months. A small business will get an immediate deduction for assets costing less than $20,000, and installed and ready for use before 30 June Also, small business depreciation pools valued under $20,000 as at 1 July 2018 can be immediately written off in the income year. The current lock-out laws for simplified depreciation rules, which prevent small businesses from re-entering the pooling rules for five years if they opt out, will continue to be suspended until 30 June Division 7A UPE rule strengthened major reform delayed Division 7A of ITAA 1936 will be amended to clarify the circumstances in which it applies to unpaid present entitlements (UPEs), where a related private company becomes entitled to a share of trust income as a beneficiary, but has not been paid that amount. The amendments will apply from 1 July Division 7A is an integrity rule that requires benefits provided by private companies to related taxpayers to be taxed as dividends unless they are structured as division 7A complying loans. This measure will ensure the UPE is either required to be repaid to the private company over time as a complying loan or subject to tax as a dividend. 128

129 The start date of targeted amendments to division 7A will be deferred from 1 July 2018 to 1 July Those reforms, announced in the 10-year enterprise tax plan in the budget, will enable all division 7A amendments to be progressed as part of a consolidated package. Deductions for vacant land to be denied From 1 July 2019, tax deductions will not be allowed for expenses associated with holding vacant land. This is an integrity measure to address concerns that deductions are being improperly claimed for expenses, such as interest costs related to holding vacant land where the land is not genuinely held for the purpose of earning assessable income. The measure will apply to land held for residential or commercial purposes. However, the carrying on a business test will generally exclude land held for commercial development. Deductions that are denied will not be able to be carried forward for use in later income years. Expenses for denied deductions that would ordinarily be a cost base element (such as borrowing expenses and council rates) may be included in the cost base of the asset for capital gains tax (CGT) purposes when sold. However, deductions denied for expenses that would not ordinarily be a cost base element would not be able to be included in the CGT cost base. The measure will not apply to expenses associated with holding land that are incurred after: a property has been constructed on the land, it has received approval to be occupied and is available for rent, or the land is being used by the owner to carry on a business, including a business of primary production. No small business CGT concessions for assignment of partnership rights The small business CGT concessions will no longer be available to partners that alienate their income by creating, assigning or otherwise dealing in rights to the future income of a partnership. The small business CGT concessions assist owners of small businesses by providing relief from CGT on the disposal of assets related to their business. However, some taxpayers, including large partnerships, can inappropriately access these concessions in relation to their assignment of a right to the future income of a partnership to an entity, without giving that entity any role in the partnership. The measure applies from 7.30pm (AEST) on 8 May 2018 for small business CGT concessions in relation to the assigned rights. 129

130 Non-compliant payments to employees and contractors no longer deductible Businesses will no longer be able to claim deductions for payments to employees where they have not met their PAYG obligations. This includes where the employer is required to withhold PAYG from gross payments but fails to report or remit it to the ATO. Additionally, the deduction for businesses on certain payments to contractors that have not met PAYG obligations will be removed. Currently, if a contractor does not quote an ABN in a business-to-business transaction, the purchaser is required to withhold an amount at the top marginal tax rate and remit this amount to the ATO. Failure to do this correctly will render the entire payment non-deductible. These measures will take effect from 1 July Significant global entity definition broadened The definition of a significant global entity (SGE) will be amended to include members of large multinational groups headed by private companies, trusts and partnerships. It will also include members of groups headed by investment entities. The current definition applies only to an entity that is a member of a group headed by a public company or a private company required to provide consolidated financial statements. The measure will also ensure the Commissioner s power to determine an entity to be an SGE parent operates as intended. The SGE definition identifies entities that are required to prepare country-by-country (CbC) reports and is used to determine entities that may be subject to Australia s multinational tax integrity rules, such as the multinational anti-avoidance law (MAAL) and the diverted profits tax (DPT). The measure will apply to income years starting on or after 1 July Tightening of thin capitalisation rules The thin capitalisation rules will be amended to require entities to align the value of their assets for thin capitalisation purposes with the value included in their financial statements. This measure will apply to income years starting on or after 1 July 2019, and all entities must rely on the asset values contained in their financial statements for thin capitalisation purposes. Valuations made before 7.30pm (AEST) on 8 May 2018 may be relied on until the beginning of an entity s first income year starting on or after 1 July

131 Consolidated groups and multiple entry consolidated groups that are foreign controlled, that in turn control a foreign entity themselves, will be treated as both outward and inward investment vehicles for thin capitalisation purposes. This measure will also apply to income years starting on or after 1 July This change is intended to ensure that inbound investors cannot access tests that are only intended for outward investors. Tax exempt entity loans Tax exempt entities that become taxable after 8 May 2018 will not be able to claim tax deductions that arise on the repayment of the principal of a concessional loan. The deductions arise due to unforeseen complex interactions between the taxation of financial arrangements rules and the rules dealing with deemed market values for tax exempt entities that become taxable. Concessional loans entered into by tax-exempt entities that become taxable will be required to be valued as if they were originally entered into on commercial terms. This is an integrity measure that protects the revenue base 50% CGT discount removed for MITs and attribution MITs at the trust level Managed investment trusts (MITs) and attribution MITs (AMITs) will be prevented from applying the 50% CGT discount at the trust level. This measure will apply to payments made from 1 July The measure will prevent beneficiaries who are not entitled to the CGT discount from getting a benefit from the CGT discount being applied at the trust level. It will ensure that MITs and AMITs operate as genuine flow through tax vehicles, so that income is taxed in the hands of investors, as if they had invested directly. MITs and AMITs that derive a capital gain will still be able to distribute this income as a capital gain that can be discounted in the hands of the beneficiary. 131

132 Anti-avoidance rules for circular trust distributions extended to family trusts A specific anti-avoidance rule that applies to closely held trusts engaging in circular trust distributions will be extended to family trusts. Currently, where family trusts act as beneficiaries of each other in a round-robin arrangement, a distribution can be ultimately returned to the original trustee, in a way that avoids any tax being paid on that amount. This measure will better enable the ATO to pursue family trusts that engage in these arrangements by extending the specific anti-avoidance rule, imposing tax on such distributions at a rate equal to the top personal tax rate plus the Medicare levy. The measure will apply from 1 July Testamentary trusts and injected assets From 1 July 2019, the concessional tax rates available for minors receiving income from testamentary trusts will be limited to income derived from assets that are transferred from the deceased estate, or the proceeds of the disposal or investment of those assets. Currently, income received by minors from testamentary trusts is taxed at normal adult rates rather than the higher tax rates that generally apply to minors. However, some taxpayers can inappropriately obtain the benefit of this lower tax rate by injecting assets unrelated to the deceased estate into the testamentary trust. The measure will clarify that minors will be taxed at adult marginal tax rates only in respect of the income a testamentary trust generates from assets of the deceased estate (or the proceeds of the disposal or investment of these assets). 132

133 Superannuation Increased membership of SMSFs New and existing SMSFs and small APRA funds will be allowed to have a maximum of six members from 1 July Currently, the maximum allowable number of members in an SMSF is four. Three-yearly audit cycle for some SMSFs The annual audit requirement for SMSFs will be changed to a three-yearly requirement for SMSFs with a history of good record keeping and compliance. SMSF trustees that have a history of three consecutive years of clear audit reports and timely lodgments of the fund s annual returns will qualify. This measure will start on 1 July Preventing inadvertent concessional cap breaches Individuals whose income exceeds $263,157, and have multiple employers, will be able to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG) from 1 July The measure is intended to ensure eligible individuals can avoid unintentionally breaching the $25,000 annual concessional contributions cap due to multiple compulsory SG contributions. Employees using this measure may receive additional income that will be taxed at marginal tax rates. Improving integrity of personal contributions deductions Individual income tax returns will be modified to include a checkbox for individuals with personal superannuation contributions to confirm that they have complied with the requirements to submit a notice of intent (NOI) where they intend to take a tax deduction for the contributions. Where individuals take deductions for their personal superannuation contributions, but do not submit the required notice of intent, it results in superannuation funds not applying the 15% tax to their contribution and no tax is paid on it. 133

134 Super work test exemption for recent retirees An exemption from the work test for voluntary contributions to superannuation will be introduced from 1 July 2019 for people aged with superannuation balances below $300,000, in the first year that they do not meet the work test requirements. The work test exemption will give recent retirees flexibility to get their financial affairs in order in the transition to retirement. Currently, the work test restricts the ability to make voluntary superannuation contributions for those aged 65 74, to individuals who self-report as working a minimum of 40 hours in any 30-day period in the financial year. 134

135 Black economy measures Reforms to combat illegal phoenixing and black economy The government will reform the corporations and tax laws and provide the regulators with additional tools to assist them to deter and disrupt illegal phoenix activity. The package includes reforms to: introduce new phoenix offences to target those who conduct or facilitate illegal phoenixing prevent directors improperly backdating resignations to avoid liability or prosecution limit the ability of directors to resign when this would leave the company with no directors restrict the ability of related creditors to vote on the appointment, removal or replacement of an external administrator extend the Director Penalty Regime to GST, luxury car tax and wine equalisation tax, making directors personally liable for the company s debts expand the ATO s power to retain refunds where there are outstanding tax lodgments. Taxable payments reporting system to be expanded The taxable payments reporting system (TPRS) will be expanded to the following industries from 1 July 2019: security providers and investigation services road freight transport computer system design and related services. The TPRS requires businesses to report to the ATO any payments made to contractors during an income year. This additional reporting to the ATO is in the form of an annual report, and puts these payments in line with payments made for salaries and wages to employees. As the report is a yearly report for years starting 1 July 2019, the first annual report will be required in August These reporting requirements are identical to ones already in place for payments to contractors in the building and construction industry, as well as payments in the cleaning and courier industries, starting 1 July Large government contract tenders required to be tax compliant Businesses seeking to tender for large Australian government contracts will be required to provide information on the status of their tax obligations. Under the proposed arrangements, contracts over $4 million (including GST) will be affected. 135

136 PRACTIONER LODGMENT SERVICE (PLS)

137 Practitioner lodgment service (PLS) The practitioner lodgment service (PLS) started to replace the ATO's electronic lodging system (ELS) early in This is a mandated change and all standard 2018 tax returns will now be managed through PLS. PLS sends standard business reporting (SBR) messages using a secure connection, to the ATO's SBR service. PLS is a more interactive environment than ELS, and will enable the ATO to further extend and enhance their interactive services. The ATO is planning to retire the ELS service for all forms from 2017 onwards, in December How to use PLS Check the tax seminar video for detailed instructions for using PLS and the MYOB Lodgment Manager. We also have our online help to help you with: Setting up your system for PLS Lodging returns using PLS 137

138 PLS lodgment flow 138

139 ATO PRE-FILL FOR INDIVIDUAL RETURNS

140 ATO pre-fill for individual returns We introduced a new pre-fill feature for individual tax returns in MYOB Tax Pre-fill manager enables you to download pre-fill reports for clients using PLS. You can view these reports in PDF format and populate the pre-fill information into a client's Tax return. This feature is only available for individual returns. Pre-fill manager: uses an interactive pre-fill request and download option can process either for an individual client or for a selected client list (clients must have a tax file number assigned) reports are stored locally according to practice configuration integrates with MYOB Document Manager (DM) if installed has a simple point and click option to pre-fill downloaded data into tax returns and: will be successful for returns that are rolled over and ready to pre-fill ATO pre-fill data cannot be edited but can be deleted at the individual schedule level the ATO requires pre-fill data to be explicitly accepted each pre-fill item is considered to be a new line entry - not matched to existing data pre-fill data does not roll-forward, it is designed to be completely refreshed will save you around 3 5 minutes per return. 140

141 What data will be pre-filled? Salary and wages Private health insurance Government payment Employee share ATO interest Bank interest Dividends Averaging - PP Averaging - Div 405 Managed fund Higher education Pension - non super ETP Super income stream Super lump sum How do I use pre-fill manager? For more detailed help, watch the tax seminar video and check our Pre-fill Manager online help. 141

142 SUPPORT MATTERS

143 Support Matters 24/7 access to Knowledge Base and help Check out our new improved Knowledge Base The Knowledge Base (KB) should be the first place to investigate when you come across an error message, or if something isn t working quite right. The Knowledge Base contains many articles providing useful information and step-by-step instructions. We ve given the Knowledge Base a facelift check our step-by-step guide to see how to navigate your way round. How to search the Knowledge Base Log in to the client support website at my.myob.com.au to search the Knowledge Base: You ll be directed to a new landing page, select a product from the drop-down and enter your search text: 143

144 Refine your search using Filter by: The new style articles are easy to navigate: 144

145 How do I use [F1] help? Press [F1] when you are anywhere in AE/AO and it will go to our new-look Tax 2018 online help. For example, press [F1] when you are in the Pref-fill Manager tab: You will be directed to our Pre-fill Manager online help page: 145

146 Training Check out our new MYOB Academy where we have an extensive catalogue of free MYOB courses, to help you get the most out of your software. Contact your client manager if you d like to book specific training. Ask a colleague If there are others in your office using the same software, ask if they can answer your questions. Often your office expert can quickly explain how the software is implemented for your business. FAQs from our support desk Most popular KB articles How to restart the SBR Sender Service Refer to KB The MYOB Tax SBR server sender runs on the server Controlled through Windows Services Manager We recommend you set up a desktop shortcut PLS lodging - Troubleshooting returns stuck as transmitting or transmitted Refer to KB Knowledge Base article will assist with checking these returns In some cases correction will require MYOB Support assistance Machine Name not unique Refer to KB This occurs in a situation where the system has detected a workstation conflict There can be various reasons for this situation Terminal server environments generally require specific launch configuration 146

147 How to distribute a foreign tax credit from a trust Issue When distributing a foreign tax creditt (FTC) via the [F4] distribution function, it does not populate the foreign income tax offset at item 23 label Z. Impact Overlapping of the FITO $1,000 rule for individuals. Solution Modify the estimate generation by switching on the tax tables for the trust and reverting the answers back when completed. Additional details are available in the knowledge base article KB Workflow 1 On the front cover answer Y to the question 'Is any tax payable by the trustee. 2 Select applicable Tax Table 9. 3 Navigate to and click in item 23 label Z then press [F4] to process the distribution. 4 At the distribution tab, complete the distributions for all beneficiaries. 5 Finish by reverting the changes made at steps 1 & 2 back to the original values. 147

148 How to distribute an overall trust loss between trusts (V335 error) Issue Trust A has a capital gain together with an income loss, and the overall position of trust A is a gain This gain is now being distributed to trust B, which has a capital loss greater than the gain being distributed from trust A The net result of the distribution will be an overall loss for trust B. Impact Validating trust B will produce a V335 error This is because MYOB Tax immediately offsets the capital gain against the capital loss, and the validation check assumes that trust B has only received a loss from trust A. Solution In trust B, remove the loss from item 8, then add the loss amount to the losses schedule. Workflow 1 Go to the income tab item 8, and update label R to NIL. 148

149 2 On the deductions tab at item 25 enter NIL. 3 Create a BP losses schedule. 4 Include the income losses incurred this year at part A. 5 Complete the reconciliation at part F. 149

150 KEY DATES & SUPPORT CONTACT DETAILS

151 Key dates and support contact details MYOB Tax release date MYOB Tax will be available for download on my.myob.com.au from Friday 22 June ATO ELS gateway Will continue to accept 2018 Activity Statements. ATO availability ATO won t be processing tax returns on Saturday 23 June and Sunday 24 June, because they ll be updating their systems in preparation for Tax Time ATO PLS lodgments Lodgment of 2018 returns will be accepted by the ATO from Monday 25 June ATO PLS processing ATO will start processing 2018 returns from Friday 6 July 2018 Processing continues as usual for 2017 and prior year tax returns. ATO refunds Taxpayers will receive 2018 tax refunds from Tuesday 17 July

152 Getting support from MYOB This section lists the MYOB client support contact details for the 2018 tax season. It also outlines the recommended steps you should follow to get the most from MYOB client support. Submit a support request You can log in to the MYOB client support website at my.myob.com and follow the steps to submit a support request. Contact details Website: my.myob.com Phone: clientsupport@myob.com.au Extended support hours for tax season Monday to Friday 8:30am 7:00pm AEST 25 June 2017 to 10 August 2018 Saturdays 10:00am 3:00pm AEST 30 June and 7 July 2018 Online community forum for accountants myob.com.au/aeforum myob.com.au/aoforum End of financial year hub myob.com/au/accountants-and-partners/support/end-of-financial-year 152

153 APPENDIX A TAX RATE TABLES

154 Appendix A 2018 tax rates Resident individual Taxable income Tax on taxable income % on excess (marginal rate) $18,200 Nil 19% $37,000 $3, % $87,000 $19,822 37% $180,000 $54,232 45% The 2% Medicare levy is not included in the rates above. The Medicare levy surcharge of between 1% and 1.5% is not included in the rates above. The 2% TBRL ceased to apply for taxable income exceeding $180,000 from 1 July Non-resident individual Taxable income Tax on taxable income % on excess (marginal rate) Nil Nil 32.5% $87,000 $28,275 37% $180,000 $62,685 47%* The 2% TBRL ceased to apply for taxable income exceeding $180,000 from 1 July The 2% Medicare levy does not apply to non-residents. Unearned income of resident minors (under 18 years) Unearned income Tax payable 0 $416 NIL $417 $1,307 66% of the amount over $416 Over $1,307 45% of the total amount 154

155 Unearned income of non-resident minors (under 18 years) Unearned income Tax payable 0 $ % $417 $663 66% of the amount over $416 Over $663 45% of the total amount Tax rates for working holiday makers (WHMs) from 1 January 2017 Taxable income of WHM New marginal tax rate 0 $37,000 15% $37,001 $87, % $87,001 $180,000 37% $180, % 155

156 Medicare levy Category of No levy payable if Reduced levy payable if Ordinary rate of levy Taxpayer taxable income (or taxable income (or payable where taxable family income) family income) is within income (or family income) does not exceed the range (inclusive) equals or exceeds Single $21,980 $21,980 $27,475 $27,476 Married (without child) $37,089 $37,089 $46,361 $46,362 Single SAPTO $34,758 $34,758 $43,447 $43,448 Married SAPTO $48,385 $48,385 $60,481 $60,482 For each dependent child, add $3,406 to the lower limit or $4,257 to the upper limit. The figures applicable to married taxpayers also apply to taxpayers who would be entitled to a sole parent rebate if entitlement to that rebate had not been restricted. Where there are more than six dependent children or students, add $4,195 for each extra child or student to the upper limit. Medicare levy surcharge Base tier Tier 1 Tier 2 Tier 3 Single threshold $90,000 $105,000 $140,000 $140,001 + Family threshold $180,000 $210,000 $280,000 $280,001 + Medicare levy surcharge 0 1% 1.25% 1.5% The Medicare levy surcharge (MLS) is levied on Australian taxpayers who do not have an appropriate level of private hospital insurance and who earn above a certain income. The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child. 156

157 Low income tax offset Income threshold Calculation of offset 0 $37,000 $445 $37,001 $66,667 $445 [(TI 37,000) x 1.5%] Over $66,667 NIL 157

158 Private health insurance rebate PHIR Income thresholds Status Base tier Tier 1 Tier 2 Tier 3 Single $90,000 $105, ,000 $140,001 + Family $180,000 $210,000 $280,00 $280,001 + Additional child increment (two or more children): $1,500. Rebate for premiums paid from 1 July 2017 to 31 March 2018 (period 1). Age Benefit code Base Tier Tier 1 Tier 2 Tier 3 Under % % 8.644% 0% % % % 0% 70 or over % % % 0% Rebate for premiums paid from 1 April 2018 to 30 June 2018 (period 2) Age Benefit code Base tier Tier 1 Tier 2 Tier 3 Under % % 8.471% 0% % % % 0% 70 or over % % % 0% The income thresholds that determine tiers for the Medicare levy surcharge and the private health insurance rebate will be paused at the rates until Therefore, thresholds remain unchanged for the years. 158

159 Dependency offsets Tax offset Rebate Maximum ATI Invalid and invalid carer $2,666 Dependent: $10,946 Family: $100,000 Relevant rebate amounts for zone and overseas forces rebates Notional offsets Sole parent $1,607 Dependent: 1,786 Students under 25 or first child younger than 21 $376 Dependent: 1,786 Other children under 21 $282 Dependent: 1,410 Zone and overseas forces rebate Zone Special zone A Ordinary zone A Special zone B Ordinary zone B Overseas forces Rebate amount $1, % of the relevant rebate amount $ % of the relevant rebate amount $1, % of the relevant rebate amount $ % of the relevant rebate amount $ % of the relevant rebate amount To qualify for the tax offset, the taxpayers usual place of residence must have been in a remote area (not necessarily continuously) for: 183 days or more during , or 183 days or more during the period 1 July 2016 to 30 June 2018 (including at least one day in ) and you did not claim a zone tax offset in your 2017 tax return. Offset is no longer available to fly-in-fly-out and drive-in-drive-out taxpayers to zones A and/or B. 159

160 Seniors and pensioners tax offset (SAPTO) Code Details Maximum Lower Upper Combined offset threshold threshold taxable income A Single, widowed, separated $2,230 $32,279 $50,119 N/A B Married, living apart due to illness both eligible $2,040 $31,279 each $47,599 each $95,198 C Married, living apart due to illness spouse not eligible $2,040 $31,279 each $47,599 each $95,198 D Married, living together both eligible $1,602 $28,974 each $41,790 each $83,580 E Married, living together spouse not eligible $1,602 $28,974 each $41,790 each $83,580 Each person is assessed on half their combined rebate income, and unused offsets are transferable. Offset value is reduced by 12.5 cents in the dollar of rebate income. 160

161 SAPTO pension age test tables For a person born Required pension age at 30 Jun Before 1 July July December years and 6 months 1 January June years 1 July December years and 6 months After 31 December years The taxpayer is eligible if they reach pension age at 30 June. Eligibility for an Australian government age pension from Centrelink requires an age of 65 years or older on 30 June, or subject to Veterans Affairs requirements, aged 60. From 1 July 2017 the Centrelink pension age is being progressively increased to age 67. Net medical expenses tax offset (NMETO) Income range Single Family Claim threshold Excess Tier 1 $90,000 $180,000 $2,333 20% Tier 2 $90,001 $180,001 $5,504 10% Additional child increment $1,500 Taxpayers can only claim the medical expenses rebate for medical expenses relating to disability aids, attendant care or aged care until the end of the income year. From the year, the medical expenses rebate will be abolished. Motor vehicle rates per business km Description If a car travelled 5,000 km or less during the year on business (or the claim is limited to 5,000 km) Per km 66 cents The Depreciation cost limit for $57,

162 Private company loans Division 7A loan interest is 5.30% until 30 June Research and development (R&D tax offset) Eligible entity type Eligible entities not controlled by tax exempt entity with aggregated turnover > $20 million Eligible entities controlled by a tax-exempt entity where aggregated turnover is < $20 million Rate 43.5% (refundable) 38.5% (non-refundable) Income test thresholds Description Income rest Income threshold Employee share schemes Adjusted income $180,000 Business Losses Adjusted income $250,

163 HELP, TSL, SSL or ABSTUDYSSL and SFSS thresholds Income threshold Tax Rate% 0 $55,873 0% $55,874 $62,238 4% $62,239 $68, % $68,603 $72,207 5% $72,208 $77, % $77,619 $84,062 6% $84,063 $88, % $88,487 $97,377 7% $97,378 $103, % $103, % Where a taxpayer has both a HELP and a TSL debt the HELP debt will be repaid first. Student financial supplement loan repayments thresholds Income threshold Tax rate % 0 $55,873 0% $55,873 $68,602 2% $68,602 $97,377 3% $97, % 163

164 Employment termination payments ETP and superannuation lump sums preservation age For a person born Preservation age Before 1 July July June July June July June July June After 30 June ETP caps (indexed annually) Type of cap Employment termination payment $200,000 $205,000 Whole of income (not indexed) $180,000 $180,000 Death benefit ETP. The cap is reduced for any death benefit termination payment previously received as a result of the same termination, whether in an earlier income year or the year of receipt. $200,000 $205,

165 Genuine redundancy and early retirement scheme payment limits Income year Base limit For each complete year of service $9,936 $4, $10,155 $5, $10,399 $5,200 Superannuation lump sum caps (indexed annually) Type of cap Superannuation lump sum (lifetime cap) $200,000 $205,000 Superannuation untaxed plan cap $1.445 million $1.480 million Transfer balance cap and defined benefit income cap Income year General transfer balance cap amount Define benefit income cap $1.6 million $100, $1.6 million $100,

166 Superannuation contributions caps concessional Income Year All ages $25, $25,000 Any concessional contributions more than the cap also count towards the person s nonconcessional contributions cap. For and , a single concessional cap of $25,000 applies for all ages. Superannuation contributions caps non-concessional Details Any age $100,000 $100,000 Bring forward cap for individuals aged under 65 $300,000 $300,000 An individual can only make non-concessional contributions in the year, if their total superannuation balance is less than $1.6 million. Income exceeding $250,000 extra tax on contributions Division 293 tax is an additional tax on super contributions if a taxpayer combined income and super contributions are more than the threshold. From 1 July 2017 this threshold is $250,000. Division 293 tax is 15% of taxable concessional contributions above the $250,000 threshold. 166

167 Superannuation guarantee charge Year SG rate to % % % % % Later than % No SGC is payable where earnings are less than $450 per month, or employees are aged under 18 and work less than 30 hours a week. Maximum contribution base is $52,760 earnings per quarter. Contribution payment is due by the 28th day after the end of each quarter. Government super co-contribution rates Taxable income Lower threshold $36,813 $37,697 Upper threshold $51,813 $52,697 Maximum contribution $500 $500 Matching contribution $0.50 $0.50 The 10% income from working test has been removed for and later years. The offset decreases by cents for each dollar of income over the lower threshold. Taxable income is the taxpayer s assessable income plus reportable fringe benefits and reportable employer superannuation contributions. 167

168 Low-income superannuation contributions offset The low-income superannuation contributions offset (LISC) has been abolished and replaced by the low-income superannuation tax offset (LISTO) from 1 July Low-income superannuation tax offset Thresholds Amount Adjusted taxable income threshold $37,000 Maximum contribution payable $500 Minimum contribution payable $10 Matching rate 15% Super contributions on behalf of spouse offset Income threshold Tax offset amount Lower threshold $37,000 Upper threshold $40,000 To be eligible for the rebate, a spouse cannot: exceed their non-concessional contribution cap for the year have a total superannuation balance equal to or exceeding the general transfer balance cap ($1.6 million for ) immediately before the start of the financial year in which the contribution was made. The tax offset is calculated as 18% of the lower of: $3,000 minus the amount over $37,000 earned by the spouse a tax offset of $540, being 18% of $3,

169 Supervisory levy self-managed super funds Type of SMSF Label L Label M Label N Net amount amount amount amount label L-M+N Existing SMSF (not wound up during ) $259 Blank Blank $259 Newly registered in (not wound up in ) $259 Blank $259 $518 Existing SMSF that is wound up in $259 $259 Blank Blank or zero Improvements to pre-cgt assets Income year Threshold 2018 $147, $145, $143, $140, $136, $134,

170 General interest charge rates Period Interest rate July September % October December % January March % April June % July September % October December % January March % April June % July September % Fringe benefits tax Rate Y/E 31 March 2018 Y/E 31 March 2019 FBT 47% 47% Gross-up rate Type 1 benefits Gross-up rate Type 2 benefits Where the previous year s FBT liability is below $3,000, a single payment is due on 21 May

171 Company tax rates Companies generally including corporate limited partnerships, strata title bodies corporate, trustees of corporate unit trusts and public trading trusts. To be eligible as a base rate entity and taxed at 27.5% of taxable income, companies need to have an aggregated turnover less than $25 million and be carrying on a business. Non-profit companies 171

172 Retirement savings accounts (RSA) 172

173 Life assurance companies 173

174 Pooled development funds 174

175 Credit unions 175

176 Trustee tax rates Beneficiary assessed under section 98(1) or (2) Resident beneficiary Share of net income Tax on taxable income % on excess (marginal rate) $18,200 Nil 19% $37,000 $3, % $87,000 19,822 37% $180,000 $54,232 45% Non-resident beneficiary Taxable income Tax on taxable income % on excess (marginal rate) Nil Nil 32.5% $87,000 $28,275 37% $180,000 $62,685 45% Individual beneficiaries assessed under section 98(3) and 98(4) Taxable income Tax on taxable income % on excess (marginal rate) Nil Nil 32.5% $87,000 $28,275 37% $180,000 $62,685 47%* 176

177 Company trustee beneficiaries assessed under section 98(3) and 98(4) Flat tax rate 30% Deceased estate less than 3 years from date of death (section 99) Resident beneficiary Taxable income Tax on taxable income % on excess (marginal rate) $18,200 Nil 19% $37,000 $3, % $87,000 19,822 37% $180,000 $54,232 47%* Non-resident beneficiary Taxable income Tax on taxable income % on excess (marginal rate) Nil Nil 32.5% $87,000 $28,275 37% $180,000 $62,685 47%* 177

178 Deceased estate greater than 3 Years from date of death resident beneficiary Share of net income Tax payable $ on excess (marginal rate) $416 Nil 50% $594 $89 19% $37,000 $7, % $87,000 $23,280 37% $180,000 $58,005 47%* For taxable incomes exceeding $180,000, the 2% TBRL applies to the part of taxable income exceeding $180,000. Non-refundable tax offsets cannot be used to offset the TBRL, but foreign income tax offsets can. Deceased estate greater than 3 years from date of death resident beneficiary Taxable income Tax on taxable income % on excess (marginal rate) Nil Nil 32.5% $87,000 $28,275 37% $180,000 $62,685 47%* For taxable incomes exceeding $180,000, the 2% TBRL applies to the part of taxable income exceeding $180,000. Non-refundable tax offsets cannot be used to offset the TBRL, but foreign income tax offsets can. No beneficiary presently entitled (section 99A) Flat tax rate 47% 178

179