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Australia Budget 2017-18 Delivered Including Reduced Tax Rates for Small Businesses, Measures Targeting Tax Avoidance, and Others — Orbitax Tax News & Alerts

On 9 May 2017, Australian Treasurer Scott Morrison delivered the country's Budget 2017-18. Main tax related measures of the Budget are summarized as follows.

Small Business Measures

  • Increasing the small business entity turnover threshold from AUD 2 million to AUD 10 million per annum from 1 July 2016, with the current AUD 2 million annual turnover threshold retained for access to the small business capital gains tax concessions, and access to the unincorporated small business tax discount extended to entities with turnover less than AUD 5 million per annum;
  • Reducing the company tax rate to 27.5% in 2016-17 for companies with aggregated annual turnover below AUD 10 million, increasing the threshold to 25 million for 2017-18 and to 50 million for 2018-19, and further reducing the rate to 27% for 2024-25, 26% for 2025-26 and 25% for 2026-27;
  • Extending to 30 June 2018 the AUD 20,000 immediate deductibility threshold for assets acquired by small businesses with annual turnover below AUD 10 million.

Most of the small business changes are included in the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016, which passed both house of parliament on 9 May and is awaiting royal assent.

Anti-Avoidance Measures

  • Amending the Multinational Anti-Avoidance Law to ensure corporate structures involving foreign partnerships and foreign trusts are subject to the law with retrospective effect (1 January 2016);
  • Introducing anti-hybrid rules to keep banks and financial institutions from exploiting different tax treatments of their regulatory capital across borders from 1 January 2018 (or 6 months after royal assent of relevant legislation if later); and
  • Amending the principal asset test for the non-resident CGT exemption on the disposal of non-portfolio interests to include the disposed entity as well as associates so non-residents cannot circumvent the exemption restriction when the disposed interests derive value from real property.

Other Measures

  • Introducing a bank levy at a rate of 0.06% on liabilities of large banks exceeding AUD 100 billion;
  • Increasing the Medicare levy for individual taxpayers from 2% to 2.5% from 1 July 2019; and
  • Increasing the foreign-resident capital gains withholding tax rate from 10% to 12.5% and reducing the threshold from AUD 2 million to AUD 750,000 effective 1 July 2017.

Click the following link for the Australian government Budget website for more information on the Budget 2017-18 plans.