Cessation of the temporary budget repair levy
Various rates of tax that apply to superannuation entities have been decreased in line with the cessation of the temporary budget repair levy which was payable by some individuals for 2014–15, 2015–16 and 2016–17. Rates affected include those that apply to the taxable income of non-complying superannuation funds and non-complying approved deposit funds (ADFs) (47% to 45%) and the non-arm’s-length component of the taxable income of a superannuation fund, ADF or PST (47% to 45%).
Removal of deduction for Death Benefit Increase
From 1 July 2017, the deduction for amounts of increased superannuation lump sum death benefits will be removed in certain circumstances.
If a fund member died on or before 30 June 2017, the fund may still be eligible to claim a deduction provided the fund pays the benefit before 1 July 2019.
From 1 July 2019, the deduction is no longer available.
Foreign resident capital gains withholding tax
On 9 May 2017 the Government announced changes to the threshold and withholding rate for foreign resident capital gains withholding. The changes will apply to contracts entered into on or after 1 July 2017.
A 12.5% withholding obligation will apply to the disposal of:
- taxable Australian real property with a market value of $750,000 or more
- an indirect Australian real property interest
- an option or right to acquire such property or interest.
Where the vendor of these Australian assets is a foreign resident, the purchaser must pay 12.5% of the purchase price to the ATO as a foreign resident capital gains withholding payment.
A vendor can claim a credit for the foreign resident capital gains withholding payment the purchaser has made to the ATO by lodging a tax return for the relevant year.
The previous market value exemption threshold of $2 million for real property and 10% withholding rate will apply for any contracts that were entered into before 1 July 2017 (even if settlement is after that date).
For more information, see Capital gains withholding: Impacts on foreign and Australian residents.
Transitional CGT relief realisation event
Transitional CGT relief was available in 2016–17 for SMSFs to defer the recognition of certain capital gains that might arise as a result of individual's complying with the transfer balance cap and Transition-to-Retirement Stream (TRIS) reforms. A previously deferred capital gain is recognised where:
- the SMSF chose the relief in 2016–17
- the SMSF notified the ATO as required via the Capital gains tax (CGT) schedule 2017, and
- the SMSF has a realisation event during 2017–18.
A new item has been added to the Capital gains tax (CGT) schedule 2018 to recognise the previously deferred capital gain. SMSFs must now use the schedule where the entity has recognised a previously deferred capital gain.
Residential rental properties – changes to deductions for travel expenses and second-hand depreciating assets
From 1 July 2017, you are generally not entitled to a deduction for:
- travel expenses relating to your residential rental property
- decline in value of certain second-hand depreciating assets in your residential rental property
- which you entered into a contract to acquire, or which you otherwise acquired, at or after 7.30pm on 9 May 2017, or
- which you used, or had installed ready for use, for any private purpose in 2016–17 or earlier, and for which you were not entitled to a deduction for a decline in value in 2016–17.
You may be entitled for these deductions if you are using your residential rental property in carrying on a business (including the business of property investing) or another exception applies.
Residential rental property is residential premises you use to provide residential accommodation for the purpose of producing assessable income.
For more information, see:
- Rental properties 2018
- Guide to depreciating assets 2018
- Draft Law Companion Ruling LCR 2018/D2 Residential premises deductions: travel expenditure relating to rental investment properties.
Transition to retirement income stream (TRIS)
You are now required to provide the number of open Transition to retirement income stream (TRIS) accounts in the accumulation phase for each member on 30 June 2018.
Exempt Current Pension Income and Transition-to-Retirement Income Streams (TRIS)
From 1 July 2017, SMSFs can only claim exempt current pension income where the current pension liabilities relate to the payment of retirement phase superannuation income stream benefits.
This means SMSFs will have to pay tax on the earnings from assets supporting a TRIS where the recipient is under 65 and has not notified the SMSF they have met a condition of release with a nil cashing restriction (retirement, terminal medical condition or permanent incapacity).
Exempt Current Pension Income and segregated assets
From 1 July 2017, SMSFs can no longer use the segregated assets method to determine exempt current pension income where at any time during 2017–18 the SMSF had:
- at least one superannuation interest paying retirement phase superannuation income stream benefits, and
- at least one member who, just before 1 July 2017 had a total superannuation balance of more than $1.6 million and was receiving retirement phase superannuation income stream benefits from any fund.
Total superannuation balance
You are now required to provide for each member their 30 June:
- accumulation phase account balance
- retirement phase account balance – capped defined benefit income streams – excluding market linked income streams
- retirement phase account balance – non-capped defined benefit income streams – including market-linked income streams
It is now conditional as to whether you provide for each member their 30 June:
- accumulation phase value
- retirement phase value.
If an SMSF is providing an accumulation phase value or a retirement phase value, this should be included at these labels on the SMSF annual return. These values should not be provided on a TBAR for the same financial year.