important treasury update

Proposed tax and super changes

The Federal Treasurer has today issued a press release on tax reforms proposed by the previous Federal Government. At the calling of the election, there were 96 tax and superannuation measures that had been announced, but not yet legislated.

We have listed below the most important measures from the Press Release, and whether or not they will proceed.

Proposed measures that will not proceed

1.  The cap on deductions for self education expenses. This means there will be no upper limit on the amount that can be deducted for self education expenses such as seminars, training courses and textbooks.

2.  Removal of the FBT statutory formula for motor vehicle fringe benefits. Removal of this option would have required logbooks to be kept for every vehicle subject to FBT.

3.  Tax on superannuation pension earnings over $100,000 per pensioner. Currently, no tax is payable on earnings for superannuation balances used to pay pensions. This tax exemption will now continue unchanged.

4.  Thin capitalisation – the proposed denial of interest deductions on money borrowed to buy foreign shares will not proceed.


Proposed measures that will proceed

1.  Abolition of the net medical expense tax offset. The last year for the tax offset on medical expenses will be the year ended 30 June 2015, and even then it will only be available if there were claims in both the 2013 and 2014 financial years.


Proposed measures unlikely to proceed

The Government does not intend to proceed with the majority of the 96 measures. However, they intend to conduct a review to determine if there will be any “compelling reason” why any of the remaining measures should proceed. Such measures unlikely to proceed include:

1.  Obtaining the research and development tax concession in quarterly instalments (as opposed to when you lodge your return).

2.  The proposed requirement for charities to conduct their activities principally in Australia. This was a concern for charities who also conduct charitable work in other countries.

3.  The “look through” treatment for earn-out operations. This measure had the potential to simplify the capital gains tax rules for business owners who sell their business with an up-front payment, followed by a subsequent earn-out based on post-sale profits.

4.  Creation of a “reverse charge” mechanism for GST purposes, which was to replace the current measures in relation to when a business is sold as a going concern, and also to the sale of farm land.

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