Our industry had its biggest night of nights last night with the release of Joe Hockey’s second budget. It was forecast as an important budget for the government and it appears to deliver on several key tax issues.
From Initiative’s perspective, we’ve welcomed many of the proposals outlined, and in particular, those that apply to small businesses. We’ve summarised just a few of what we believe to be the most important proposed changes below.
Businesses
Small corporations will benefit from having their company tax rate cut to 28.5 per cent. Unincorporated small businesses will benefit from a 5 per cent tax discount, up to $1,000 per year.
All small businesses will get an immediate tax deduction for every asset they buy costing less than $20,000. Currently, the threshold sits at $1,000. This $20,000 limit applies to each individual item. Small businesses can apply this $20,000 rule to as many individual items as they like. These arrangements start Budget night and continue until the end of June 2017.
Some other changes affecting businesses include:
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Start-ups will also be allowed to immediately deduct professional expenses incurred when they start a business.
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Small businesses will also benefit from a new Capital Gains Tax rollover relief when changing their legal structures.
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A reinvigorated Restart Wage Subsidy will encourage small businesses to employ older workers.
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Employees in start-ups will get access to tax breaks on shares they receive as part of their pay.
Individuals
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Foreign backpackers will no longer qualify for the $20,000 tax-free threshold.
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The FBT loophole allowing some not-for-profit and public health workers to cut tax by salary sacrificing the cost of certain expenses will be tightened.
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Digital movies, TV, books and music delivered by overseas companies will cost 10 per cent more from July 2017 in a policy dubbed the “Netflix tax” to raise $350 million over the next four years.
Education, Science and Industry
- University graduates living overseas will have to repay their HECS debts.
Families
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The simplified Child Care Subsidy will be implemented from 1 July 2017 with a single subsidy based on family income.
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Families earning around $65,000 or less will receive a subsidy of 85 per cent of their child care fees (up to an hourly fee cap). There will be no annual cap for families earning around $185,000 or less.
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From 1 January 2016, the ‘No Jab, No Pay’ rule will remove all exemptions, excluding those for medical reasons, for access to child care payments and Family Tax Benefit Part A end of year supplement.
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The Nannies Trial will fund around 4,000 nannies, providing subsidised care to approximately 10,000 children. The trial will commence on 1 January 2016.
Pensioners
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170,000 pensioners with modest assets will have an average increase of $30 in their pension per fortnight provided they own their own home and have additional assets worth less than $250,000 (singles) and $374,000 (couples).
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Tens of thousands of wealthy retirees will no longer receive the full pension, and many will also see a reduced part-pension as the government drops the eligibility threshold.
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A single homeowner could hold assets up to around $800,000, and a couple could hold assets up to $1.2 million (down from $1.5 million) and still be eligible for a part pension.
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Pensioners living or travelling overseas will have their pension assessed after six weeks instead of 26 weeks.
Due to these changes, those who no longer receive a pension will remain eligible for a Commonwealth Seniors Health Card or Health Care Card.
If you’d like to know how any of the above points might affect you, feel free to give us a call – we’d be more than happy to help.
Kim Jay CA – Director
