2015/16 Federal Budget Significant Changes & Tax Planning

With the end of the financial year fast approaching, we are making sure our clients utilize any legislative changes in May and June. Tax Planning allows for you to forward plan your end of year tax liability and assist with your cash flow requirements (this may even help reduce your final tax bill or increase your refund).

 2015/16 Federal Budget

The 2015/Federal Budget announcements are aimed at supporting small business and growing jobs, and supporting families while progressively repairing the budget deficit.

It is important to note that all announcements mentioned are proposals only at this stage.  This means that they may change prior to being legislated.

Small business

Small enterprises will be given tax breaks that the government hopes will improve job growth and are also being encouraged to go out and invest in their businesses through generous new tax deductions.

• The tax rate for small companies (aggregated annual turnover of less than $2m ) will be 28.5% (reduced by 1.5% from 30% to 28.5%) from the 2015/16 income year.A 5% tax discount for individual taxpayers with business income from an unincorporated business (sole traders, partnerships or trusts) with an aggregated annual turnover of less than $2m will also be introduced from the 2015/16 income year. This benefit will be capped at $1,000.
• The threshold below which small businesses can claim an immediate deduction for the cost of assets will be temporarily increased from $1,000 to $20,000 from 7pm 12 May 2015 to end of June 2017.
• Start-up business professional expenses will be able to claim an immediate deduction associated with starting a business from the 2015/16 income year.
• Primary producers will be able to claim accelerated depreciation for water facilities, fodder storage and fencing from 1 July 2016.

Fringe benefits tax and managed investment trusts

• A separate, single grossed-up cap of $5,000 will be introduced for salary sacrificed meal entertainment and entertainment facility leasing expenses (meal entertainment benefits) for employees of not-for-profits.
• The fringe benefits tax exemption for portable electronic devices used primarily for work purposes will be expanded from 1 April 2016.
• The start date of the new Managed Investment Trusts (MITs) regime has been deferred to 1 July 2016. However, MITs can choose to apply the new regime from 1 July 2015.

GST and luxury car tax

• Offshore supplies of digital products & imports to Australian consumers will be subject to GST from 1 July 2017.
• The previously announced measure to implement reverse charge rules for going concerns and farmland sales will not proceed.

Individuals and families

• The long-awaited childcare reforms will be means tested to simplify the childcare payments system. However, parents will have to wait until 2017 to see the bulk of the reforms kick in.
• The government will not be proceeding with 2014/15 Budget measure elements that relate to the pension income test free areas and deeming thresholds.
• The Medicare levy low-income thresholds for singles, families and single seniors and pensioners will be increased from the 2014/15 income year.
• Families will no longer be eligible for subsidised child care or the Family Tax Benefit Part A end-of-year supplement unless their child is up-to-date with all childhood immunisations.
• The Family Tax Benefit (FTB) Part A large family supplement will cease from 1 July 2016.
• The ability for individuals to access government assistance in the form of the existing Parental Leave Pay (PLP) scheme, in addition to any employer-provided parental leave entitlements, will be removed, from 1 July 2016.
• The methods of calculating work-related car expense deductions will be modernised from the 2015/16 income year.
• From 1 July 2016, the tax residency rules will be changed to treat most people who are temporarily in Australia for a working holiday as non-residents for tax purposes, regardless of how long they are here.

Superannuation

• Early access for people with terminal medical condition to superannuation will be in effect from 1 July 2015. The government will change the period that two medical practitioners – including a specialist – certify that they are likely to die within two years to gain unrestricted tax free access to their superannuation balance.
• The federal government will not impose new taxes on super in the 2015 budget.
• The supervisory levies paid by financial institutions will increase.
• From 1 July 2016 the proportion of income that can be excluded from any pension income test will be capped at 10 per cent.

Farmers

• The Drought Concessional Loan Scheme and Drought Recovery Concessional Loan Scheme have been extended for another year with the provision of A$250 million. Assistance of A$25 million has also been granted to farmers to reduce the impact of pest animals in drought-affected areas.
• Farmers are encouraged to build fences, dams, tanks and irrigations channels and from 1 July 2016 will be able to immediately deduct capital expenditures on fencing and water facilities. 

Pensions

• Pensioners with ‘modest’ assets will receive about $30 more a fortnight
• The government proposes to tighten the assets test threshold and taper rate. However, Pensioners will keep their Commonwealth Seniors Health Card

ASSETS TEST FREE AREAS

* Single homeowner $250,000 (previously $202,000)

* Single non-homeowner $450,000 (previously $348,500)

* Couple homeowners $375,000 (previously $286,500)

* Couple non-homeowners $575,000 (previously $433,000)

ASSETS TEST CUT-OUT

* Single homeowner $547,000 (previously $775,000)

* Single non-homeowner $747,000 (previously $922,000)

* Couple homeowners $823,000 (previously $1.15 million)

* Couple non-homeowners $1.023 million (previously $1.298 million).

TAPER RATE (by how much the pension is reduced)

* Increases from $1.50 to $3 per $1,000 of assets over the test-free threshold.

How can Morrows help?

We welcome the opportunity to discuss the budget changes and how they may affect you in more detail. Please do not hesitate to contact us on:

Telephone: (03) 9690 5700

Email: morrows@morrows.com.au

Disclaimer: The information provided in this communication is general in nature and not intended to be advice. You should contact our office for further information or for a tailored solution to your needs.