1. The ‘benchmark’ rate for Division 7A loans has been set at 5.45% for the year ended 30 June 2016;
2. The ‘luxury’ car limit has been set as $57,466 for the year ended 30 June 2016 which is unchanged from last year;

Some Victorian State tax news:

The law that imposes an additional stamp duty levy of 3% on purchases of residential property by foreign purchasers entered into on or after 1 July 2015; and a .5% Land Tax surcharge on land owned or deemed to be owned by an absentee owner as of 31 December 2015, has come into effect.

Tax changes:

Car Expenses:

1. The Government has released draft legislation to ‘simplify’ the car expense deductions for individuals.  Currently an individual can choose from four methods:-
2. Cents per kilometre which is capped at 5,000kms;
3. Logbook with no kilometre limit;
4. 12% of original value up to the depreciation limit in the year of purchase;&
5. One-third of actual expenses.

The proposal is to abolish the last two methods mentioned above and the cents per kilometre will be changed to a flat rate of 66 cents per km regardless of engine size.  The draft legislation has been made available for public consultation until 5 August 2015.

Withholding Tax on Taxable Australian Property Disposals:

The Government has also released draft legislation to impose a withholding tax on transactions involving the disposal of real “taxable Australian property” by foreign residents.  Real property covers freehold and leasehold and certain mining rights.

As from 1 July 2016 a purchaser of taxable Australian property from a foreign resident will be required to deduct 10% of the gross sale proceeds if they know or it was reasonable for them to know they were a foreign resident.  Once the payment is made to the ATO, the foreign resident vendor will be able to claim a credit against their Australian income tax liability.

The Australian property affected by this measure is:-

1. Taxable Australian real property except if it is residential premises worth less than $2.5M;
2. An indirect Australian real property interest where the underlying value is more than 50% derived from Australian real property; or
3. An option or right to acquire Australian real property or an indirect Australian real property interest.

We will have to wait & see whether this measure will be passed and in what form but in any event it is some time before it will take effect.  So if you enter into a contract to purchase before 1 July 2016 this measure will not apply to you.