Australia's 2017/18 Federal Budget published on 9 May 2017 included a number of developments international companies, foreign investors and foreign residents need to be aware of. Jamie Towers, partner at Hanrick Curran provides a quick overview and explains why he views the Federal Budget as a missed opportunity to provide real tax reform.
Impact on foreign and temporary residents
Foreign and temporary residents will be denied access to the Main Residence tax exemption on their Australian properties. This will significantly disadvantage New Zealand citizens who have not applied for Australian permanent residency and are currently considered temporary residents. Existing properties will be grandfathered until 30 June 2019.
The Capital Gains Tax (CGT) withholding tax rate on real property sold by non-residents will rise from 1 July 2017 to 12.5% (currently 10%) and will apply to properties worth over AUS$750,000. Due to the lower threshold, this will be of considerable interest to developers as these measures can apply to Australians who do not register to confirm their residency.
A levy equivalent to the Foreign Investor Application fee (currently AUS$5,000 p.a.) will be imposed on foreign owners of a property that is not occupied nor made available for rent for over six months of the year. This will apply to new purchases of residential investment properties by foreign persons after 9 May 2017. A 50% cap on foreign ownership will be imposed on vendors of new property developments to ensure sufficient supply remains for Australians.
Multinational tax avoidance
Jamie Towers comments that Australia is taking big steps on the international stage in terms of providing leadership in combating tax evasion and ensuring tax transparency: "The Australian Government has done much over the last couple of years, including aligning Australia's laws with OECD best practice and even going beyond that by introducing Multinational Anti-Avoidance Laws (MAAL) including a Diverted Profits Tax to apply from 1 July 2017. The MAAL will be further strengthened through its application to structures involving partnerships and trusts, rather than just companies."
Commitment to a lower rate of company tax
The Government has again committed to its 2016/2017 budget measure of reducing the company tax rate for all companies to 25%. This measure was passed by the Senate, but only for businesses with turnover of less than AUS$10 million (rising to AUS$50 million). The Government plans to extend these measures to all companies and eventually lower the company tax rate to 25%.
Read the full article: https://www.alliottgroup.net/practice-management-resources-for-owner-managed-firms/2017-18-australian-federal-budget/
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