2016/17 Federal Budget announcement – what it means for you

Every year the Budget illustrates the Government’s fiscal and economical outlook for the whole of Australia but we’re here to highlight the most significant changes for businesses and individuals. Our Tax Gurus have outlined important tax planning considerations and changes for small businesses, medium enterprises and superannuation. As always, if you have a question about how the recent Federal Budget release affects your business, please contact us.

 

Tax Planning Considerations

 

• Businesses with turnover between $2 to $10 million would be better off to defer purchase of assets cost between $1,000 to $20,000 to after 1 July 2016.
• Business with turnover under $2 million still benefit from the $20,000 instant asset write-off if purchased before 1 July 2016.
• Individuals should take advantage of the current $30,000 or $35,000 concessional superannuation contribution cap before it reduces to $25,000 from 1 July 2017
• Individuals with income between $250,000 to $300,000 should fully utilise concessional contribution cap before Division 293 threshold reduces from $300,000 to $250,000 from 1 July 2017

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1. Small Business Tax Measures

 

1.1 Increasing the small business entity turnover threshold

The Government will increase the small business entity turnover threshold from $2 million to $10 million from 1 July 2016. The current $2 million threshold will be retained for access to the small business CGT concessions. The eligibility threshold for the unincorporated small business tax discount will be raised to $5 million.




 

A selection of concessions available for small business and eligible thresholds is as follows:

 

Aggregated annual turnover	$20,000 instant asset write-off	Small business CGT concessions/th>	Company tax rate reduction	Discount for unincorporated entities	Small business pool	Immediate deduction for certain start-up costs
< $2 m	Yes	Yes	Yes	Yes	Yes	Yes
< $5 m	Yes	No	Yes	Yes	Yes	Yes
< $10 m	Yes	No	Yes	No	Yes	Yes

 



 

2. General Business Tax Measures

 

2.1 Reducing the company tax rate to 25%

The Government will reduce the company tax rate to 25% over 10 years.

The rate will firstly be reduced to 27.5%, and then it will be reduced progressively to 25% in 2026-27.
 

 

 

3. Individual Tax Measures

 

3.1 Raising the 32.5% personal income tax threshold

The Government will increase the 32.5% personal income tax threshold from $80,000 to $87,000 from 1 July 2016.

This measure will reduce the marginal tax rate on incomes between $80,000 and $87,000 from 37% to 32.5%..

 

 

4. Goods and Services Tax

 

4.1 GST will apply to low value imports

From 1 July 2017, the GST will apply to low value goods imported by consumers.

Overseas suppliers that have an annual Australian turnover of $75,000 or more will be required to register for GST and remit GST for low value goods supplied to Australian consumers.

 

 

5. Superannuation

 

5.1 Concessional contributions cap will be reduced

The annual cap on concessional superannuation contributions will be reduced to $25,000 from 1 July 2017. There will be one cap for all taxpayers irrespective of their age.


 

5.2 Catch-up concessional superannuation contributions will be allowed

From 1 July 2017, individuals will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years.

Access to the unused cap amounts will be limited to individuals with a superannuation balance less than $500,000.

Amounts are carried forward on a rolling basis for a period of five consecutive years. Only unused amounts accrued from 1 July 2017 can be carried forward.



 

5.3 Harmonising contribution rules for those aged 65 to 74

From 1 July 2017, the Government will remove the existing restrictions on people aged 65 to 74 from making superannuation contributions for their retirement.

People under the age of 75 will no longer have to satisfy a work test and will be able to receive spouse contributions.

 

5.4 Personal superannuation contributions will be tax deductible

From 1 July 2017, all individuals up to age 75 will be able to claim an income tax deduction for personal superannuation contributions. This effectively allows all individuals, regardless of their employment circumstances, to make concessional superannuation contributions up to the concessional cap.

 

5.5 A new lifetime cap for non-concessional superannuation contributions

The Government will introduce a $500,000 lifetime non-concessional contributions cap. 

The measure will commence at 7.30pm (AEST) on 3 May 2016. 

Contributions made before commencement cannot result in an excess. However, excess contributions made after commencement will need to be removed, otherwise penalty tax will apply.

The cap will replace the existing annual non-concessional contributions caps of $180,000pa (or $540,000 every 3 years for individuals aged under 65).

 

5.6 Division 293 threshold will be reduced

From 1 July 2017, the Division 293 threshold will be reduced from $300,000 to $250,000. This threshold is the point at which high income earners pay additional 15% contributions tax on concessional contributions.

This measure is designed to improve sustainability and fairness in the superannuation system by limiting the effective tax concessions provided to high income individuals.

 

 

That’s awesome! Where to from here?

All businesses (and individuals) are unique so these changes will affect everyone differently. As always, Consolid8 recommends you contact us to schedule a tax planning meeting with one of our talented Tax Gurus to ensure you’re in the best possible position in the lead up to End of Financial Year (EOFY). If you are currently a Consolid8 Client, our team will be in touch with you soon to start the ball rolling.