The 2016 Budget announced by Treasurer Scott Morrison on 3 May 2016 has sparked a lot of attention in the market. The following describes the main changes and how it affects you.
* Please note: At the time of writing, these changes were government proposals only and have not been legislated. The information in this article was correct at the time of writing (7 May 2016).
Impacts on Individual
* Small Tax Cut
From 1 July 2016, the 32.5% personal income tax threshold will be increased from $80,000 to $87,000.
* Removal of 2% Temporary Budget Repair Levy
2% Budget deficit levy (tax) on incomes over $180,000 will be removed from 1 July 2017.
Impacts on Small to Medium Businesses
* Increase Small Business Turnover Threshold to $10 million
From 1 July 2016, the small business entity turnover threshold will be increased from $2m to $10m, meaning more businesses will be able to access existing small business income tax concessions including:
- lower small business corporate tax rate
- simplified depreciation rules including the instant asset write off threshold of $20,000 available until 30 June 2017
- simplified trading stock rules
- option to account for GST on a cash basis and pay GST instalments as calculated by the ATO
- simplified method of paying PAYG instalments calculated by the ATO
- immediate deduction for various start-up costs;
- a 12-month prepayment rule; and
- FBT exemption for work-related portable electronic devices
* Reduction In Corporate Tax Rate
From 1 July 2016, the small business tax rate will be lowered from $28.5% to 27.5%.
The government will reduce the corporate tax rate, ultimately to 25%, on an 11 year phased basis depending on turnover.
* Unincorporated Small Business Tax Discount
From 1 July 2016, an increase in the unincorporated small business tax discount from current 5% to 8% to a maximum value of $1,000, and an extension of the threshold from a turnover of $2 million to less than $5 million.
Impacts on Superannuation
* Tax Deductible Personal Contributions To Super
From 1 July 2017 all individuals, not just the self-employed, will be able to claim an income tax deduction for personal super contributions. This includes those who cannot currently access salary sacrifice arrangements through their employers. Any contributions would count towards the concessional contribution cap.
* Concessional Contributions Cap Reduced To $25,000
From 1 July 2017, concessional contributions cap will be reduced to $25,000 for all individuals, regardless of age.
* Lifetime Cap Of $500,000 For Non-concessional Contributions
From 3 May 2016, this cap replaces the existing non-concessional cap of $180,000 per annum (or $540,000 over three years for those under age 65).
* Allow Catch-up Concessional Contributions
From 1 July 2017, individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions for “unused cap amounts” where they have not reached their concessional contributions cap in previous years.
* Reduction In The ‘Division 293 Tax’ Income Threshold
Division 293 imposes an additional 15% tax on concessional contributions (to bring the total contributions tax to 30%) for ‘high income earners’.
From 1 July 2017, the income threshold will be reduced from $300,000 to $250,000.
* Removal Of The Work Test For Those Aged 65 To 74 (Inclusive)
From 1 July 2017, it is proposed to remove the current work test for those aged 65 to 74 (inclusive) to receive non-mandated contributions (including salary sacrifice and personal contributions).
* Low Income Spouse Offset
From 1 July 2017, the income threshold for the receiving spouse of the low income spouse tax offset will be increased from $10,800 to $37,000.
* Low Income Superannuation Tax Offset (LISTO) To Be Introduced
From 1 July 2017, the LISTO will provide a non-refundable tax offset to superannuation funds, based on the tax paid on concessional contributions made on behalf of members with adjusted taxable income less than $37,000, up to a cap of $500.
* 1.6m Cap On Superannuation Transfer Balances
From 1 July 2017, a cap of $1.6 million on the total amount of accumulated superannuation an individual can transfer into the tax-free pension phase will be introduced. Subsequent earnings on these balances will not be restricted.
Amounts transferred in excess of the cap will be subject to tax.
Members already in the pension phase with balances above $1.6m will be required to reduce their pension balance to $1.6m by 1 July 2017.
* Transition To Retirement Income Streams (TRISs)
From 1 July 2017, the tax exemption on earnings for pension assets supporting TRISs will be removed.
* Tax Treatment Of Payments From Income Streams
Individuals will no longer be able to make an election to treat certain TRIS payments as lump sums for tax purposes, which currently makes them tax free up to the low rate cap ($195,000).
Goods and Services Tax (GST)
* GST Small Business Taxpayers: Election To Use Cash Basis
The government will extend the option to account for GST on a cash basis and pay instalments calculated by the ATO for small businesses with an annual turnover less than $10m.
* GST And The Importation Of Low-value Goods
From 1 July 2017, GST will be extended to low value goods imported by consumers. Overseas suppliers which have Australian turnover of $75,000 or more will be required to register for, collect and remit GST for all goods supplied to consumers in Australia.
This article is intended to provide general information of an educational nature only.
As there are changes that may affect your circumstances, please contact us at Dynamic Accountax to discuss strategies for your particular situation.