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Jul 05, 2017 / News

Taxation

Top Tax Tips - 5 July

Seller beware – you may need a clearance certificate when selling property

From 1 July 2017, all purchasers of certain types of Australian property must withhold 12.5% (was 10% in the 2017 income year) of the purchase price, unless the transaction is excluded from this obligation.

Transactions will not be subject to the 12.5% withholding obligation if:

  • the purchase price of the property is less than $750,000 (was $2 million in the 2017 income year); or
  • the parties undertake certain actions before settlement date (e.g. a resident seller obtains a clearance certificate).

The lowering of the exemption threshold from $2 million to $750,000 coupled with Australia’s expensive housing market practically means that most resident sellers (selling a property for $750,000 or more) must apply for a clearance certificate before they sell their property.  We can obtain a clearance certificate so that the 12.5% withholding obligation will not apply to sellers.

Note, the 2017 threshold ($2 million) and withholding rate (10%) will apply for any contracts that were entered into before 1 July 2017 (even if settlement occurs after 1 July 2017).

GST on imported services and digital products           

As mentioned in our earlier top tax tips, from 1 July 2017, overseas businesses with an annual turnover of $75,000 or more that supply services (e.g. architectural or legal services) or digital products (e.g. streaming or downloading of movies, music, apps, games and e-books) to Australian consumers (e.g. individuals not registered for GST) must register for Australian GST.

An Australian GST registered business that purchases such services/products form an overseas business will not be charged GST on such purchases provided the Australian business declares its registration for GST and provides its Australian business number (ABN) to the overseas vendor business

You may not have to do a stocktake for 2017

Because the threshold for determining whether a business is a small business entity has been increased to $10 million (from $2 million) from the 2017 income tax year onwards (see our previous Top Tax Tips here), businesses with an aggregated turnover of less than $10 million may not need to do a stocktake for tax purposes.

From 1 July 2016 businesses will only need to do a stocktake if:

  • their business turnover is $10 million or more; or
  • the business estimates that the difference between the opening and closing stock at the beginning and end of the income tax year is more than $5,000.

Despite the tax law not requiring a stocktake for such businesses, the estimated difference in opening stock at 1 July 2016 and closing stock at 30 June 2017 must still be capable of being verified in the event of an ATO review.  For very small businesses, the difference in stock values may be small but larger businesses may still need to do a stocktake to be able to demonstrate that the difference is less than $5,000. 

While the tax law rules regarding trading stock are mandatory, many businesses find significant commercial advantages are gained from undertaking a least one stocktake per year to gauge poor performing stock, correct pricing of stock, stock ordering processes, theft of stock by customers or employees or whether obsolete or out of date stock should be discarded.  Your Nexia Edwards Marshall Advisor can assist you with any commercial or tax issues relating to stock including real time reporting of stock levels to improve profitability.

How can Nexia Edwards Marshall help you?

For any questions or to discuss any of the above in relation to your personal situation, please contact Grantley Stevens or your Nexia Edwards Marshall Advisor.

The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Advisor.