2015/16 Federal Budget Summary (Small Business, Self Funded Retirees and Tax Payers)

Wednesday, July 1, 2015 by Wakeful Partners | 1 Comment | Taxonomy: ,

On Tuesday the Federal Treasurer delivered the 2015/16 Federal Budget. There are a number of announcements in this budget that will impact on small business owners, tax payers and families. As such we outline for you a brief summary of some of the relevant proposals that we believe you should be aware of.

The budget has introduced some measures over the next 4 years that will impact directly on you as a taxpayer. Please note that these proposals need to successfully pass through Parliament before becoming law and thus maybe subject to further changes or amendments.

If you have any queries in relation to the summary notes below or any other matters then please don’t hesitate to contact our office.

2015/16 Federal Budget Summary

Expanding Accelerated Depreciation for Small Businesses
  • Effective from the 12th May 2015 the following small business the Government will expand accelerated deprecation for small businesses as follows:
    • The immediate asset depreciation write-off threshold — which allows small businesses with an aggregated annual turnover of less than $2 million to immediately depreciate assets they start to use or have installed ready for use — will be increased from $1,000 to $20,000.
    • The immediate asset write-off will be available only from 7.30 pm on 12 May 2015 until 30 June 2017.
    • Assets that cost $20,000 or more can continue to be placed in the small business simplified depreciation pool.
    • The current rules which lock out or prevent small businesses from re-entering the simplified depreciation regime for five years if they choose to exit the regime will be suspended until 30 June 2017.
  • Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed in the small business simplified depreciation pool (small business pool) and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter. The small business pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing small business pools).
Tax Cuts for Small Business
  • From the 2015–16 income year, all small businesses will receive a 1.5 percentage point tax

    • The tax rate for companies with an aggregated annual turnover of less than $2 million will be reduced from 30 per cent to 28.5 per cent.
    • Companies with an aggregated annual turnover of $2 million or above will continue to be subject to the current 30 per cent rate.
    • Current maximum franking credit rate for a distribution will remain unchanged at 30 per cent for all companies.
    • Individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for a small business tax discount, to be delivered as a tax offset and capped at $1,000 per individual for each income year.
Deduction of Professional Expenses (Legal and Professional Cost for Business Start up)
  • From the 2015–16 income year, start-up businesses will be entitled to immediately deduct their expenditure on professional expenses associated with establishing a company, trust or

    • Eligible expenses will include fees for:
    • professional advice;
    • accounting advice; and
    • legal advice
  • These expenses will no longer be deductible over five years under section 40-880 of the ITAA 1997.
GST Changes
  • Digital products and services imported by consumers are not currently subject to the GST.
  • GST will apply from 1 July 2017 to non-exempted products and services, including digital supplies purchased from overseas and from Australia.
Employee Share Schemes
  • As previously announced, the Government has proposed reform of the taxation arrangements for
    Employee Share Schemes from 1 July 2015. Under current law, income tax must be paid on options and shares when they vest, which is hampering the ability of relevant employers to suitably remunerate employees.
  • Key elements of this proposal are:
    • Ensuring that the capital gains tax discount is applicable to relevant employee share scheme interests in circumstances where options are converted to shares, and these shares are disposed of within 12 months of the exercise date.
    • Providing the Commissioner of Taxation with additional discretionary powers in relation to the minimum three-year required holding period, and
    • Where options or shares are provided at a discount, having any necessary tax payable deferred until such interests are ultimately disposed of.
Residency & Foreign Income
  • The tax residency rules will be changed from 1 July 2016 to treat most temporary working holiday makers in Australia as non-residents for tax purposes regardless of how long they are
    in Australia.
  • This means that they will not be entitled to the tax free threshold and will not benefit from the low income tax offset (LITO).
  • The Government will remove a tax exemption currently available to government employees deriving foreign income while delivering Official Development Assistance overseas for more
    than 90 continuous days.
Capital Gains Tax
  • Small businesses with an aggregated annual turnover of less than $2 million will be able to change their legal structure without attracting a CGT liability.
  • This measure will assist small businesses to change to a more suitable legal structure as the business becomes more established.
Motor Vehicle Deductions
  • The Government will modernise the methods for calculating work-related car expense deductions from the 2015–16 income year by:
    • removing the ‘12 per cent of original value’ and the ‘one-third of actual expenses’ methods; and
    • replacing the current rates under the ‘cents per kilometre method’ which are based on engine size with a single rate of 66 per cent per kilometre, irrespective of engine size.
    • The Government will retain the ‘log-book method’.
Family Assistance Payments
  • The Government confirmed in the 2015–16 Federal Budget that it would make child care simpler, more affordable, accessible and flexible by:
    • abolishing the current Child Care Benefit, Child Care Rebate and Jobs, Education and Training Child Care Fee Assistance programmes;
    • introducing a single means tested Child Care Subsidy (CCS) for families with incomes of:
      • < approximately $60,000 — provided with a CCS of 85% per child of the lower of
        the actual fee or a benchmark price which will taper to 50% per child for family incomes of approximately $165,000 and above;
      • < $180,000 — not subject to a cap on the amount of subsidy they receive;
      • ≥ $180,000 — a cap of $10,000 per child for the total value of subsidies received

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