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Federal Budget 2014/15 - Tax Changes

May 2014

The Government has restated its commitment to remove the Minerals Resource Rent Tax and the associated measures, and the Carbon Tax.  While the rephrasing of the superannuation guarantee rate is noted in the budget (see Superannuation) the other associated measures are not. 

Unfortunately there has been no mention of the planned reduction in the immediate asset write-off rate for small business entities. The threshold was meant to be reduced from $6,500 to $1,000 from 1 January 2014 but the legislation was blocked in the Senate. We still have no certainty on when this change will take place.

As part of the Government's initiative to sort out and reduce the volume of announced but unenacted legislation, it has announced that it will not proceed with a number of other measures and amend others including:

Data matching and third party reporting
The Government will defer the start date for proposed legislative measures relating to third party reporting and data matching. The measures were originally intended to apply from 1 July 2014 but will be deferred until 1 July 2016. The expanded measures are expected to apply to taxable government grants and certain other government payments; sales of real property, shares and units in managed funds; and sales through merchant debit and credit services.

Multi-entry consolidated groups 
The Government will not proceed with the proposal to remove inconsistencies in the tax treatment of multiple-entry consolidated groups.  Treasury however will start consultation on an amendment to extend a modified form of the unrealised loss rules to multiple-entry consolidated groups and on other measures identified by a recent review that will clarify certain aspects of the tax law in this area.

Capital Gains Tax (CGT) and foreign residents
Refine the 2013/2014 Budget measure that amends the principal asset test in the foreign resident CGT regime. 

To prevent the double counting of assets, the measure will now apply to interests held by foreign residents in unconsolidated groups as well as in consolidated groups.  

For interests held by foreign residents in unconsolidated groups, the amendment will apply to CGT events occurring on or after the date the Exposure Draft is released for public consultation. 

For interests held in a consolidated group or a multiple entry consolidated group the measure will continue to have effect from 7.30pm (AEST) 14 May 2013.

Integrity measure for consolidated groups
Refine the measure to clarify that accounting liabilities relating to securitised assets held by a subsidiary will be disregarded in certain situations where the subsidiary leaves a consolidated group and/or joins a consolidated group.  This change will apply to arrangements that commence on or after 7.30pm on 13 May 2014.  Transitional rules will apply to arrangements that commence before this time. 

The double deductions measure, the churning measure and the deductible liabilities measure will be amended so that they apply to arrangements that commence on or after the date of announcement of the original measure (14 May 2013), rather than to the exit or entry of a subsidiary that takes place on or after the date of announcement. 

The deductible liabilities measure will also be amended so that retirement villages' residential loan liabilities are excluded from the measure.
 
Managed investment trusts tax system deferral
The Government will defer the start date of the new tax system for managed investment trusts by 12 months, to 1 July 2015.  The tax law will also be amended to allow managed investment trusts and other trusts treated as managed investment trusts to continue to disregard the trust streaming provisions for the 2014/205 income year.

For more information about the Federal Budget, please contact us on 02 9957 4033 or via our contact form. 

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Last updated May 2014. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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