Below we have set out a summary of the 2016 Federal Budget.
Some elements of the budget require further analysis to clarify how they will be implemented and to determine the strategies we can utilise to benefit you.
These will be published on our website and our Facebook page.
The full budget papers are available at www.budget.gov.au
The company tax rate for small business (under $2m annual turnover) will be reduced from 28.5% for the 2016 financial year to 27.5% effective for the 2017 financial year with further cuts earmarked as outlined below.
For businesses with a current annual turnover of between $2m and $10m will be reclassified effectively at 1 July 2016 to be small businesses. This will see their current tax rate fall from 30% to 27.5% effectively for the 2017 financial year.
The reclassification of businesses with up to $10m turnover as small businesses will, in addition to allowing them the reduced tax rate, will also allow them access to:-
- immediate deductions for assets under $20,000 until 30th June 2017
- The option to account for GST on a cash basis and pay GST installments if they choose
- Simplified trading stock rules avoiding businesses having to do stock takes if the movement is less than $5,000
For non company businesses such as sole traders turning over less than $2m annually who currently receive a 5% tax offset will, from 1st July 2016 have this increased to 8%, but this remains capped at a maximum of $1,000
Changes apply to allow self-correction for inadvertent errors relating to shareholder loans in private companies (Div 7A) and safe harbour provisions which allow simplification and certainty for companies with shareholder loan arrangements
From 1st January 2017, employers will receive a wage subsidy of up to $10,000 for job seekers under 25 years old with barriers to employment and up to $6,500 for the most job‑ready job seekers. Job seekers must be registered with ‘Jobactive’ or ‘Transition to Work’, and have been in employment services for at least six months for employers to be eligible for the wage subsidy.
Internship (trial employment) placements of up to twelve weeks from 1st April 2017, will be offered each year to enable businesses and job seekers to trial their employment fit. Job seekers will receive a $200 fortnightly incentive payment and businesses will receive $1,000 upfront to host an intern.
Any business with a turnover of between $2M to $10M now classified as small business does not receive small business Capital Gains Tax concessions. This means that a business with a Capital Gains tax event (the sale of an asset whereby a profit is made), where turnover exceeds $2m and net assets exceed $6m will not receive Capital Gains Tax concessions.
ATO are adding 1,000 staff to compliance activities predominantly targeting large businesses and multinational tax avoidance.
Goods under $1,000 previously imported without GST will in future likely have GST attributed to them.
Between the age of 65 up to but not including 75 an opportunity exists to continue to contribute to superannuation after 1st July 2017, without the need to satisfy the work test.
For those with individual balances under $500,000 in Superannuation, if you do not make the full $25,000 per annum concessional Superannuation contribution in a year after 1 July 2017, then any unused amount each year will carry forward for up to 5 years so that you can make additional contributions up to those previously unused limits in the future.
From 1st July 2017 the 10% test (where an individual who received more than 10% of their income from employment), which restricted individuals who received employment income from contributing to super personally and claiming a tax deduction has been removed. This will allow anyone to top up their super and claim a deduction without it having to be done as a salary sacrifice.
From 1st July 2017 low income spouses with incomes up to $40,000 can benefit from having superannuation contributions made on their behalf of which up to $540 of tax offsets can be claimed by their higher income earning spouse. This also now applies for those up to and including age 74.
Those with incomes under $37,000 who pay superannuation tax of 15% on contributions will have this rebated to the superannuation fund up to a maximum of $500 offset. (this was otherwise scheduled to end on 30 June 2017)
The current concessional contributions cap (i.e. how much super you can pay into the fund and claim a tax deduction for doing so) will reduce to $25,000 from 1st July 2017.
Where previously $180,000 could be contributed per annum as a non concessional contribution, now a lifetime limit of $500,000 replaces it entirely, and for those that have already contributed up to $500,000 non concessional contributions since the 2008 financial year, they will be locked out from contributing anything further after 3rd May 2016.
Those with individual balances in excess of $1,600,000 in superannuation pension phase, will be required to move any excess into an accumulation phase account after 1st July 2017, resulting in tax at 15% applying on the earnings on that balance (compared with a nil tax rate applicable on the balance in the pension phase account). The $1.6m cap is indexed with inflation in $100,000 increments.
Those who have started a transition to retirement pension (i.e. are over preservation age but not retired) will have the income generated within their superannuation pension account taxed at 15% after 1 July 2017 instead of nil as it is currently.
Those on packages exceeding $250,000 including all concessional super contributions (including employer contributions of 9.5%), will now be subjected to 30% tax on their concessional superannuation contributions (rather than 15%) from 1st July 2017. This formerly applied only to those on packages exceeding $300,000.
The 32.5% personal income tax threshold will increase from $80,000 to $87,000 from 1st July 2016. The new tax rates from 1st July 2016 will be as follows (plus medicare):
From 1 July 2017 The budget repair levy surcharge of 2% that applied to those earning in excess of $180,000 will be removed.
Tobacco excise to increase tax on smokers by 12.5% p.a. from 2017 - 2020