Set out below is an overview of major Income Tax Legislation changes effective to 1 January 2017, extracted from the Australian Income Tax Legislation 2017 – 3 Volume Set.
Tax and Superannuation Laws Amendment (2015 Measures No 6) Act 2016
No 10 of 2016, assented to 25 February 2016 and effective from 26 February 2016
- The Act makes amendments to change the capital gains tax (CGT) treatment of the sale and purchase of businesses involving certain earnout rights — rights to future payments linked to the performance of an asset or assets after sale.
- As a result of these amendments, capital gains and losses arising in respect of look-through earnout rights will be disregarded.
- Instead, payments received or paid under the earnout arrangements will affect the capital proceeds and cost base of the underlying asset or assets to which the earnout arrangement relates.
- The Act also introduces a new regime imposing withholding obligations on the purchasers of certain Australian assets. The purpose of the regime is to assist in the collection of foreign residents’ capital gains tax.
Tax Laws Amendment (Small Business Restructure Roll-over) Act 2016
No 18 of 2016, assented to 8 March 2016 and effective from 1 April 2016
- The Act makes amendments to provide greater flexibility for small businesses owners to change the legal structure of their business.
- It provides a new roll-over to make it easier for small business owners to restructure by allowing them to defer gains or losses that would otherwise be made from transferring business assets from one entity to another as part of a genuine restructure.
Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2016
No 23 of 2016, assented to 18 March 2016 and effective from 19 March 2016
- The Act requires certain financial institutions (FI) to report information to the ATO about financial accounts held by foreign tax residents.
- The purpose of the Common Reporting Standard is to help participating states address tax evasion by exchanging financial account information between tax authorities.
Tax and Superannuation Laws Amendment (2016 Measures No 1) Act 2016
No 52 of 2016, assented to 5 May 2016 and effective from 1 July 2016)
- The Act makes amendments to increase the maximum amount that can be held in farm management deposits (FMDs) by a primary producer to $800,000.
- It enables certain primary producers experiencing severe drought conditions to withdraw an amount that has been held in an FMD for less than 12 months.
- It enables FMDs to be used to offset loans or other debts.
Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016
No 53 of 2016, assented to and effective from 5 May 2016
- The Act gives effect to a new tax system for certain managed investment trusts (MITs) for income years starting from 1 July 2016.
Tax Laws Amendment (Tax Incentives for Innovation) Act 2016
No 54 of 2016, assented to 5 May 2016 and effective from 1 July 2016
- The Act makes amendments to encourage new investment in Australian early stage innovation companies with high growth potential by providing investors, who invest in such companies, with a tax offset and a capital gains tax exemption for their investments and to improve access to venture capital investment and make the regimes more attractive to investors.
Budget Savings (Omnibus) Act 2016
No 55 of 2016, assented to 16 September 2016 and effective from 1 October 2016
- The Act makes amendments to reduce the refundable and non-refundable rates of the tax offset available under the research and development tax incentive for the first $100 million of eligible expenditure.
- It enables the ATO to implement a streamlined procedure for completing tax file number declarations using the Commissioner’s online service and allow the Commissioner to provide employers a validation of a person’s personal details.
- It also changes the way fringe benefits are treated under the income tests for family assistance.
Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016
No 81 of 2016, assented to 29 November 2016 and effective from 1 January 2017
- This Act implements the government’s reforms to superannuation announced in the 2016/17 Budget and the subsequent changes announced following consultation.
- The measures in the Act reduce access to tax concessions for the wealthiest individuals and target tax concessions to encourage all Australians to be more self‑sufficient in retirement.
- These reforms also increase flexibility and choice in superannuation to support how people work and save for retirement.
Treasury Laws Amendment (Working Holiday Maker Reform) Act 2016
No 89 of 2016, assented to and effective from 2 December 2016
- The Act makes amendments requiring employers of working holiday makers to register with the ATO from 1 January 2017.
Income Tax Rates Amendment (Working Holiday Maker Reform) Act 2016
No 92 of 2016, assented to and effective from 2 December 2016
- The Act makes amendments to apply a 15 per cent income tax rate to working holiday maker taxable income (that is assessable income derived from Australian sources by working holiday makers less relevant deductions) on amounts up to $37,000, with ordinary tax rates for taxable income exceeding this amount.
Rates, Thresholds and Offsets for 2016/17
The key tax and superannuation rates, thresholds and offsets for the 2016/17 year are updated in CCH Notes to the legislation.
Key rates and thresholds include:
- Dependant (Invalid and Carer) Tax Offset (DICTO)
- Indexed ETP cap amount
- CGT: improvement threshold
- FBT: indexation factors for calculating taxable value of housing fringe benefits
- FBT: car parking threshold
- FBT: benchmark interest rate
- Superannuation: Concessional contributions cap
- Superannuation: Non-concessional contributions cap
- Superannuation: CGT cap amount for non-concessional contributions
- Superannuation benefit caps
- Employment termination payments (ETP) cap amount
- Tax-free part of genuine redundancy payments and early retirement scheme payments
The Australian Income Tax Legislation 2017 is your comprehensive consolidation of Australian income tax and related legislation, and will be updated for all amendments to 1 January 2017, covering all the changes highlighted in this article and more.