New Revenue Benefits and Detriments

The Australian Government reduced the taxation impost on small taxpayers.  However, the NSW Government has increased the land tax and stamp duty imposts on land own by some family trusts.

Some of the benefits are:-

  1. A lower company tax rate for small businesses for the 2016-17 tax year – the company tax rate for small businesses has reduced from 30% to 27.5%. The maximum turnover a small business can have to get the benefit of this lower tax rate is $10 million (it was formerly $2 million and will be $25 million in the 2017 – 2018 financial year).
  2. Immediate tax write-off for small businesses – a small business, namely a business with turnover of less than $10 million, can immediately deduct the full purchase price of an asset acquired for less $20,000. Previously the cost of such an asset had to be written off over a number of years approximately equal to the expected life of the asset.  This instant write-off was extended by the 2017 Federal Budget so as to apply up to the 30 June 2018.

One of the detriments is:-

  1. Foreign persons are required to pay a higher rate of stamp duty on property acquisitions in NSW and a higher rate of land tax on land owned in NSW than the already high rates paid by Australian residents. However, typical family trusts utilised by many of our clients could be unwittingly caught by the higher rates of stamp duty and land tax on property acquired by or held in their family trusts.  Generally, family trusts have a wide class of potential beneficiaries who can benefit under the family trust.  If one of these beneficiaries is a foreign person then the family trust could be deemed to be a foreign person and be liable to higher rates of stamp duty and land tax.

So if your family trust allows income or assets of the family trust to be distributed to members of your extended family who live overseas then you need to take action now to avoid surcharge rates of stamp duty and land tax.  If these members of your extended family are still Australian citizens (even if they are not ordinarily resident in Australia) you should not have any issue.

With all revenue issues there are always “pluses” and “minuses”.

Stephen Rush

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