Key Measures from Federal Budget 2015-2016
Written by Weston, Woodley & Robertson on 15 June 2015
Small businesses were the clear winners from the Federal Budget for the 2015-2016 year. Childcare and families will also be impacted by the childcare reform package proposed by the Federal Government.
We outline below key measures in the Federal Budget:
The Federal Government announced a "Growing Jobs and Small Business" package to support and assist small businesses with aggregated annual turnover of less than $2 million. The legislation has been introduced to Parliament but has not yet been passed.
1. Tax cuts
The tax cuts will be effective from 1 July 2015 and will be applied as follows:
- The company tax rate will be reduced from 30% to 28.5%.
- Dividends paid from small business companies will continue to be franked at 30%.
b) Unincorporated Small Businesses
- In respect of small businesses conducted through structures other than a company (eg. sole trader, trust or partnership), the individual taxpayer will be eligible for a discount of 5% of the tax payable on the business income.
- The 5% discount is capped at $1,000 per individual for each income year.
2. Instant Asset Write Off for Assets Costing Less than $20,000
a) Assets costing less than $20,000 can be written off immediately in the tax year that the assets are used or installed ready for use in the business.
b) This applies to all assets acquired and installed ready for use between 12 May 2015 to 30 June 2017.
c) Any assets costing more than $20,000 purchased in between this period will be added to the small business depreciation pool and depreciated at 15% (first
year) and 30% (subsequent years).
d) If the pool balance falls below $20,000 during this period, the remaining pool value can be written off.
3. Immediate Deduction for Professional Fees
a) Immediate deduction for professional fees incurred in starting a new business (such as legal and accounting advice) from 1 July 2015.
b) Current legislation requires such costs to be claimed over a 5 year period.
4. CGT Rollover Relief for Changing Business Structure
a) Small businesses will be able to change their legal structure without incurring or attracting any capital gains tax liability on the change.
b) This will be effective from 1 July 2016.
5. FBT Exemption for Electronic Devices
a) Small businesses will be able to provide employees with more than one work related portable electronic device and access the FBT exemption from 1 April
2016. For example, an employee can be provided with a laptop and a tablet.
b) This was previously limited to one device per FBT year.
1. Personal Tax Rates
a) No changes to personal tax rates announced in the Federal Budget.
b) 2% Temporary Budget Deficit Levy for taxable incomes over $180,000 will cease at the end of the 2016-2017 tax year.
2. Work Related Car Expenses
a) There are currently 4 methods of calculating the deduction for work related car expenses.
b) From 1 July 2015, the Federal Government will only continue with 2 out of the 4 methods.
c) 'Cents per Kilometre' method will be maintained and the rate claimed will be set at 66 cents for all cars (regardless of engine size).
d) 'Logbook' method will be maintained.
e) The '12% of original value' and 'one third of actual expenses' methods will be scrapped.
3. Increase to Medicare Levy Threshold
Proposed increase to the Medicare Levy low income thresholds. Medicare levy will not be payable if their taxable income is equal to or below (effective from 1 July 2014):
- Singles - $20,896
- Couples with no children - $35,261
- Couples with children - $35,261 plus $3,238 per dependent child / student
- Single seniors and pensioners - $33,044.
4. HELP debt recovery from overseas residents
From 1 July 2016, individuals with HELP debt and are residing overseas for 6 months or more will be required to repay their HELP debt if their worldwide income exceeds the minimum repayment threshold for Australian resident debtors.
The Federal Government has announced measures to assist primary producers facing hardship from drought and improving cashflow by allowing:
a) Immediate deduction for capital expenditure on fencing and water facilities (such as dams, tanks, bores, irrigation channels, pumps, water towers and
windmills). Under current legislation, this is deducted over 3 to 50 years.
b) Depreciate over 3 years all capital expenditure on fodder storage assets such as silos and tanks. Under current legislation, this is deducted over 30 years.
OTHER TAX MEASURES
1. GST on Imported Digital Products and Services
a) Dubbed the 'netflix tax', this measure is to tax the online purchase of digital products and services from overseas based providers.
b) The effective date of this measure is 1 July 2017.
2. FBT Cap for Employees of Public Benevolent Institutions, Charities and Hospitals
Salary sacrificed meal entertainment and entertainment facility leasing expenses will be capped at $5,000 per employee. Any excess will be subject to FBT. This will be effective from 1 April 2016.
3. Temporary Working Holiday Workers
a) Individuals on a working holiday visa will be treated as non-residents for Australian tax purposes regardless of their length of stay in Australia.
b) Consequently, they will not be entitled to the tax free threshold and will be taxed on every dollar earned.
c) This will apply from 1 July 2016.
4. ATO Focus Areas
The ATO have received additional funding to address multinational tax avoidance (companies with global revenue of at least $1 billion) and GST compliance.
a) From 1 January 2017, there will be changes to the asset test thresholds for eligibility of the aged pension.
b) The assets test threshold to qualify for the full aged pension will be as follows (this excludes the family home):
- Single home owners - $250,000 (increase from $202,000)
- Couple home owners - $375,000 (increase from $286,000)
- Single non-home owners - $450,000
- Couple non-home owners - $575,000
c) The assets threshold to qualify for the part pension will decrease to $823,000 for couples (this excludes the family home).
2. Childcare Measures
A new child care subsidy package will be introduced from 1 July 2017 and will replace the current regime. Key features under the new child care subsidy package are:
- Eligibility for the subsidy will be linked to a new activity test (based on hours worked or hours spent studying).
- A subsidy of up to 85% of the actual fee paid (up to an hourly fee cap) will be available to families with annual incomes up to $65,710.
- The subsidy will be reduced to 50% for families with annual incomes of $170,710 (in 2013-2014 dollars).
- No annual cap applies for families with annual incomes below $185,710.
- For families with annual incomes of $185,710 and above, the child care subsidy is capped at $10,000 per child per annum.
- The income thresholds will be indexed by CPI.
Please contact our team if you wish to discuss how the Federal Budget could impact your individual circumstances and further detail on these proposed measures.
The information presented is for general information only and does not constitute the provision of advice. The information provided herein should not be used as a substitute for consulting with our office on your individual circumstances. No responsibility is accepted for any person or entity acting upon the contents of this article.