The 2015-16 Federal Budget focuses on small businesses with aggregated annual turnover of less than $2 million.
1. Small business
· CGT-roll-over for small business restructures
From 01 July 2016 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. CGT roll-over relief will apply if:
- the business has aggregated turnover of less than $2 million;
- there is a change of legal structure; and
- the same owners are maintained.
· Small business tax rate cuts
The tax rate for companies with an aggregated annual turnover of less than $2m will be reduced by 1.5% to (ie 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 with an aggregated annual turnover of less than $2m will also be introduced from the 2015/16 income year.
· Small business accelerated depreciation changes
Allowing an immediate deduction for assets costing up to $20,000 will be a significant boost to many small businesses. The $20,000 threshold will apply for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June 2017.
· Immediate deduction for business establishment costs
From 2015-16 income year an immediate deduction will be available for professional expenses that are associated with starting a new business, such as professional, legal and accounting advice or legal expenses to establish a company, trust or partnership.
From 1 July 2016 most people who are temporarily in Australia for a working holiday will be treated as non-residents for tax purposes, regardless of how long they are here. This means that they will not be eligible for the tax free threshold, presently $18,200, and will be taxed at 32.5 per cent from their first dollar of income.
3. Income tax exemption for ADF personnel deployed overseas
The Treasurer, Joe Hockey, announced that tax relief would be provided to Australian Defence Force personnel deployed on the following operations:
- Operation AUGURY — a full income tax exemption; and
- Operation HAWICK — an overseas forces tax offset.
4. Work-related deductions
From 2015-2016 income year the “12 per cent of original value” and the “one-third of actual expenses” methods will be removed. The “cents per kilometre method” will be based on a single rate of 66 per cent per kilometre, irrespective of engine size. The “log-book” method of calculating work-related car expenses remains unchanged.
5. Research and Development Tax Offset
The Government has introduced a cap of $100 million on the amount of eligible research and development (R&D) expenditure for which companies can claim a tax offset at a concessional rate under the R&D tax incentive. Expenditure beyond the $100 million cap will receive a lower offset at the company tax rate. This amendment takes effect from 01 July 2014.
6. Increasing the Medicare Levy low income thresholds
The Medicare levy low-income thresholds for singles, families and single seniors and pensioners will be increased from the 2014/15 income year. The increase adjusts the thresholds to take into account increases in the CPI.
7. Recovery of Higher Education Loan Programme debt from overseas debtors
Currently gradates living overseas can make voluntary HECS repayments to the ATO but are not under any legal obligation to do so. The changes proposed from 2016-17 will require Australian graduates living offshore for more than six months to repay their HELP debt as if they resided in Australia.
8. Treatment of Employee Share Scheme (ESS)
The government said that consultations on the draft legislation to implement changes to the taxation of ESSs identified some minor technical changes that could be made to the legislation by:
- excluding eligible venture capital investments from the aggregated turnover test and grouping rules (for the start-up concession)
- providing the capital gains tax discount to ESS interests that are subject to the start-up concession where options are converted into shares and the resulting shares are sold within 12 months of exercise, and
- allowing the Commissioner to exercise discretion in relation to the minimum three-year holding period where there are circumstances outside the employee’s control that make it impossible for them to meet this criterion.
9. GST implication on digital products and services imported by consumers
Digital products and services imported by consumers are not currently subject to the GST. The Government has announced a plan to extend the application of GST to products and services supplied digitally from overseas which poses challenges for compliance.
Broader FBT exemption for portable electronic devices
The fringe benefits tax (FBT) exemption for work-related portable electronic devices used primarily for work purposes will be expanded from 1 April 2016. Small businesses with an aggregated annual turnover of less than $2m that provide their employees with more than one qualifying work-related portable electronic device will be able to access the FBT exemption even if the additional items have substantially similar functions as the first device.
Meal and entertainment for not-for-profit employees
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. Meal entertainment benefits exceeding the separate grossed-up cap of $5,000 can also be counted in calculating whether an employee exceeds their existing fringe benefits tax (FBT) exemption or rebate cap. All use of meal entertainment benefits will become reportable. This measure will apply from 1 April 2016.
11. Changes to Superannuation
- From 01 July 2015 The Government will allow terminally ill individuals to access their superannuation earlier by increasing the period that must be certified by medical practitioners from one year to two years.
- A package of measures will be implemented to remove redundant superannuation reporting obligations and to streamline administrative arrangements for lost and unclaimed superannuation
- Increase the supervisory levies paid by financial institutions.
If you need any advice regarding the Federal Budget, the team at The Quinn Group can help. Call us on 02 9223 9166, or fill out an online enquiry.