Date of effect: From 2015/2016 income year
The Government has announced tax reductions for small businesses with an aggregated annual turnover below $2m regardless of entity type.
For companies, the company tax rate will be reduced by 1.5% to 28.5%. Maximum franking credit rates for a distribution will remain unchanged at 30%.
For taxpayers operating through an unincorporated business structure (partnerships, trusts, etc.), they will receive a 5% tax discount on the income tax payable on business income received. The discount is capped at $1,000 per individual for each income year, and delivered as a tax offset.
Accelerated depreciation on purchases up to $20k
Date of effect: Between 7.30pm (AEST) 12 May 2015 and 30 June 2017
Businesses with an aggregated turnover of under $2m can now immediately deduct assets they start to use or install ready for use, provided the asset costs less than $20,000 – subject to the amending legislation passing through Parliament (and in a timely manner).
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed in the small business simplified depreciation pool (the pool) and depreciated at 15% in the first income year and 30% each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).
It is not clear whether artworks costing up to $20,000 and purchased by small businesses will be eligible for these new accelerated depreciation rules.
Immediate deduction for professional costs setting up a business
Date of effect: Applies from 2015/2016 income year
Start ups will be able to immediately deduct a range of professional expenses required to start up a business – such as professional, legal and accounting advice.
Generally these expenses are deductible over 5 years.
CGT relief for changes to small business structures
Date of effect: Applies from 2016/2017 income year
Small business with an aggregated turnover under $2m will be able to change their legal structure without triggering CGT. CGT rollover relief is currently available on transfer of business assets from individuals, partnerships and trusts into a company structure but all other entity type changes have the potential to trigger a CGT liability.
It is expected that this would allow a much broader range of restructuring options without triggering CGT. For example, a sole trader may be able to restructure their operations into a trust structure. Bear in mind that other tax issues may still need to be addressed on restructuring a business, particularly transfer duty.
GST on digital goods & services
Date of effect: Supplies made on or after 1 July 2017
On 11 May, Treasurer Joe Hockey announced that the Government will target providers such as Netflix to ensure a “level playing field for the suppliers of digital products and services in Australia in relation to the GST.”
The draft legislation introduced on Budget night broadens the GST system to digital products and other imported services supplied to Australian consumers by foreign entities in a similar way to equivalent supplies made by Australian businesses.
This change will result in supplies of digital products, such as streaming or downloading of movies, music, apps, games, e-books as well as other services such as consultancy and professional services receiving similar GST treatment whether they are supplied by a local or foreign supplier.
In some cases the GST liability might shift from the supplier to the operator of an electronic distribution service where those operators have responsibility for billing, delivery and terms and conditions.
The regulations will be amended to allow for a change to the GST registration process for affected entities. Entities will also be able to elect to have limited registration for GST, which will prevent them from accessing input tax credits.
As this legislation seeks to amend the GST, the unanimous agreement of the States and Territories is required.
Who is affected?
Any business that supplies digital products to Australian consumers not currently subject to GST will potentially be affected by this change.
Dying able to access their super earlier
Date of effect: From 1 July 2015
Currently, patients must have two medical practitioners (including a specialist) certify that they are likely to die within 1 year to gain unrestricted tax free access to their superannuation balance. The Government will change this period to 2 years.
Social Security for superannuants
From 1 January 2016
A larger proportion of a superannuant’s defined benefit income will be taken into account when applying the relevant social security income test, capping the proportion of income that can be excluded at 10%.
A defined benefit income stream is a pension paid from a public sector or other corporate defined benefit superannuation fund where the pension paid generally reflects years of service and the final salary of the beneficiary. Under current arrangements, some defined benefit superannuants are able to have a large proportion of their super income excluded from the pension income test.
Recipients of Veterans’ Affairs pensions and/or defined benefit income streams paid by military superannuation funds are exempt from this measure.
Changes to work related car expenses
Date of effect: From 2015/2016 income year
The way work related deductions for car expenses are calculated will change.
The ‘12% of original value method’ and the ‘one-third of actual expenses method’ will be removed – the Government says they are only used by less than 2% of those who claim work related car expenses.
The ‘cents per kilometre method’ will be modernised by replacing the three current rates based on engine size with one rate set at 66 cents per kilometre to apply for all motor vehicles, with the Tax Commissioner responsible for updating the rate in following years. Currently the highest rate is 77 cents per kilometre.
The ‘logbook method’ of calculating expenses will be retained. These changes will not affect leasing and salary sacrifice arrangements.
Higher Education Loan recovery from overseas debtors
Date of effect: From 1 July 2017
The Higher Education Loan Programme (HELP) repayment framework will be extended to debtors residing overseas. From 2016/2017, HELP debtors residing overseas for 6 months or more will be required to make repayments of their HELP debt if their worldwide income exceeds the minimum repayment threshold at the same repayment rates as debtors in Australia.
Child care – New subsidy replaces 3
Date of effect: 1 July 2017
A new single Child Care Subsidy (CCS) will be introduced to replace the existing Child Care Benefit, Child Care Rebate and the Jobs, Education and Training Child Care Fee Assistance payments. The current child care related benefits will cease on 30 June 2017.
The new subsidy is means and activity tested to align it with hours of work, study etc. An indexed cap also applies to the hourly fees that can be claimed of $11.55 for long day care, $10.70 for family day care and $10.10 for outside school hours care.
For families with an annual income of up to $65,000 who meet the activity test, the subsidy covers 85% of the actual fee paid up to an hourly fee cap. The subsidy then tapers to 50% for families with annual incomes of $170,000 where it stays until family income reaches $185,000. Families with income levels of $185,000 or more will have the CSS capped at $10,000 per child per annum.
Persian Roses (2009)
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