Month: November 2017

What Company Tax Rate should I use? 27.5% or 30%? What imputation rate should I use? 27.5% or 30%?

Here are my thoughts (and sorry it took me 9 pages to answer the questions)… Company Tax Rates and Imputation

AIQS Nov Tax Depreciation Update

This is a paper I wrote to help people work out when they can claim Division 40 depreciation deductions on a rental property.

Given that the opposition has agreed to pass the Bill in the Senate I have written it as if it is law so I don’t need to update in a couple of weeks time.

Enjoy!

The Government announced back  in the 2017-18 Budget that from 1 July 2018, purchasers of new residential premises or new residential subdivisions would pay the GST on the purchase price directly to the ATO as part of the settlement.

This was to stop developers using the GST to fund the next development, rather than paying it the Commissioner, or winding up the entity before remitting the GST to the Commissioner and leaving the Commissioner to fight with the other creditors.

Well we now have the draft legislation for this change and it is bad new for developers. In a very quick summary, from 1 July 2018…

• Suppliers of residential premises or potential residential land must provide an entity that receives the supply with a notification 14 days before making the supply. Developer must tell purchasers they must remit a specific amount from the purchase price and send it to the Commissioner rather than to the developer and they must do this at least 14 days before the supply. There are penalties if they do not. But how much do they have to send to the Commissioner, rather than the developer?
• Purchasers of new residential premises or new subdivisions of potential residential land must make a payment to the ATO of 1/11^th of the price. Irrespective that the sale is almost free of GST under the margin scheme, the purchaser still must remit 1/11th of the price to the Commissioner. But thats not fair as it will mean to much GST has been paid!!!
• An entity that makes a taxable supply of new residential premises or new subdivisions of potential residential land will be entitled to a credit for the amount of the payment made to the ATO when they lodge their BAS or where a supply of new residential premises is made under the margin scheme, the supplier may apply to the ATO for a refund of a portion of the amount withheld by the purchaser. So they can get the overpaid GST back, but that will involve lodging their BAS as soon as possible.

GST used to fund the next development. Now the developer will be without the GST and probably even more if the margin scheme applies until they lodge their BAS. 1 July 2018 could get messy!