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Federal Budget 2016-17

Treasurer Scott Morrison handed down his 1st Budget, the 2016-17 Federal Budget, on the 3rd May 2016.

Businesses and innovators are among the winners but the response from those close to retirement may be mixed due to the changes to superannuation.

Revenue measures announced

The major revenue measures announced in the Budget included:

  • increasing the tax bracket at which the 37{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} tax rate starts from $80,001 to $87,001, starting from 1 July 2016;
  • a phased reduction in the company tax rate over 10 years to reduce to 25{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} by 2026-27;
  • major small business enterprise (SME) tax changes – small business threshold to be increased from current $2 million to $10 million, reduced tax rates for small business;
  • significant new measures directed at MNE tax avoidance e.g. a diverted profits tax, hybrid mismatch measures, strengthened transfer pricing rules, significant increase in administrative penalties;
  • changes to superannuation
  • The Government is to impose GST on goods imported by consumers regardless of value. The new rules will commence on 1 July 2017.

What’s in it for small business?

Due to the small business entity threshold increase to $10 million, more businesses will have access to the following:

  • reduced company tax rate of 27.5{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14} from 1 July 2016
  • the simplified depreciation rules, including immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017 and then less than $1,000;
  • the simplified trading stock rules, which give businesses the option to avoid an end of year stocktake if the value of the stock has changed by less than $5,000;
  • a simplified method of paying PAYG instalments calculated by the ATO, which removes the risk of under or over estimating PAYG instalments and the resulting penalties that may be applied;
  • the option to account for GST on a cash basis and pay GST instalments as calculated by the ATO;
  • immediate deductibility for various start-up costs (e.g. professional fees and government charges);
  • a12-month prepayment rule; and
  • the more generous fringe benefits tax (FBT) exemption for work-related portable electronic devices (e.g. mobile phones, laptops and tablets) – the FBT car parking exemption for small business already applies to entities with “annual gross income” of less than $10m.

Superannuation changes

  • $1.6m transfer balance cap for retirement accounts; with excess funds either to be transferred into accumulations account or withdrawn from the superfund
  • Non-concessional contributions: $500,000 lifetime cap from Budget night but looking back to 1 July  2007; change from the current $180,000 per annum
  • Concessional contributions cap cut to $25,000 from 1 July 2017; regardless of age
  • Concessional contributions catch-up for account balances less than $500,000; with unused cap amounts carried forward for up to 5 years where the superannuation balance is less than $500,000
  • Superannuation contributions tax (extra 15{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14}) for incomes $250,001+;
  • Transition to retirement income streams – tax concessions to be reduced from 1 July 2017 (earnings from assets supporting TRISs to be taxed at 15{8c9c1ff2dd97e2d6259091c549649f3540ea2a8d186629f84b534d36b0353f14}, individuals no longer eligible to treat TRIS as lump sum)
  • Tax deductions for personal super contributions extended, allowing all individuals up to age of 75 to claim tax deduction for personal super contributions
  • Superannuation contributions work test to be removed for ages 65 – 74 from 1 July 2017

Young work force

  • Australian employers will be eligible for a Youth Bonus wage subsidy of between $6,500 and $10,000, depending on the young person’s job readiness
  • From April 1, 2017, new initiative named “Youth Jobs PaTH – Prepare, Trial, Hire” to train young job seekers with pre-employment skills to help them get jobs
  • An internship programme with up to 120,000 placements over four years will help young job seekers who have worked for six months to gain more experience
  • They will receive $200 per fortnight in addition to their regular income support payment while in the internship
  • Businesses that take on interns will receive an upfront payment of $1,000

The full 2016-17 Budget papers are available on http://www.budget.gov.au/

Budget 2016-17