The 2015/16 Budget was handed down in May and we have summarised the changes that we think will most affect you:
Changes Effective from 12th May 2015
Expanding accelerated depreciation for small businesses:
Small businesses with an aggregate annual turnover of less than $2 million will be able to immediately deduct the cost of assets, provided the asset cost is less than $20,000
It will apply to assets acquired and installed ready for use between 7.30pm 12 May 2015 and 30 June 2017
Assets valued at $20,000 or more will continue to be placed in the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent 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).
From 1 July 2017, the thresholds for the immediate depreciation of assets and the value of the pool will revert to existing arrangements.
Changes Effective from 1st July 2015
Personal Income Tax:
Motor vehicle expense deductions:
12 per cent of original value method’ and ‘one-third of actual expenses incurred method’ to be removed with effect from 2015/16 financial year
Flat rate of 66 cents per kilometre will be applied to determine an individual’s deduction amount under this method.
Zone Tax Offset:
From 1 July 2015, the government will exclude Fly In Fly Out (FIFO) and Drive In Drive Out (DIDO) workers from the Zone Tax Offset where their normal residence is not within a particular 'zone'. Furthermore, for those FIFO/DIDO workers whose normal residence is in one zone, but who work in a different zone, they will retain the ZTO entitlement associated with their normal place of residence.
Corporate Tax Changes
Tax Cuts and Tax Discounts for Small Businesses:
Small businesses that are companies with an aggregated annual turnover of less than $2 million will receive a tax cut of 1.5 per cent
Unincorporated small businesses will receive a tax discount of 5 per cent, capped at $1,000.
Immediate deductibility for professional expenses of small businesses:
The Government will allow businesses to take an immediate deduction for a number of professional expenses associated with starting a new business.
The expenses will include certain professional, legal and accounting advice expenses which would ordinarily be deducted over a five year period.
From 1 April 2016 the government will allow an FBT exemption for small businesses (with an aggregated annual turnover of less than $2 million) that provide employees with more than one qualifying work-related portable electronic device, even where the items have substantially similar functions. It appears that, consistent with the current rules, the FBT exemption will only apply if the relevant item is primarily for use in the employee's employment.
Currently, access to benefits using the ‘terminal medical condition’ condition of release requires an individual to obtain certification from two medical practitioners (one of whom is a specialist practising in the area related to the injury or illness) stating they are likely to have less than 12 months to live. This time period is proposed to be extended to 24 months.
Social Security and Family Assistance Changes (Effective 1 January 2016)
Immunisation requirements for eligibility to government payments:
Children will have to fully meet immunisation requirements before their families can access certain government payments, from 1 January 2016.
Changes Effective from 1st July 2016
Income Tax Changes
Changes to residency rules for temporary working holiday makers:
The government will change the tax residency rules from 1 July 2016 (ie the 2017 income year) 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. This means they will be taxed at 32.5% from their first dollar of income (up to $80,000).
Corporate Tax Changes
Capital Gains Tax (CGT) rollover relief for small businesses:
Commencing from the 2016/17 income year, changes to the legal structure of a small business with an aggregated annual turnover of less than $2 million will allow a deferral of the taxing point via CGT roll-over relief.
Currently, CGT roll-over relief is only available for individuals who incorporate, while all other entity type changes (eg trusts) may give rise to a CGT liability. This measure recognises that new small businesses might choose an initial legal structure that they later find does not suit them when the business is more established.
Social Security and Family Assistance Changes
Parental Leave Pay:
Eligibility conditions for the Government’s Parental Leave Pay scheme will be tightened, preventing some parents from claiming parental leave payments from both their employer and the Government. From 1 July 2016, parents who are eligible for employer-funded parental leave that is more generous than the Government’s Parental Leave Pay scheme will no longer receive the taxpayer-funded payment as well. Where employer-funded parental leave is less than the Government’s scheme, parents will be eligible for a Government payment, up to the maximum Parental Leave Pay benefit (ie currently 18 weeks at the national minimum wage).
Age Pension (Effective 01/01/17):
The changes include increases to the ‘asset free area’ for the full pension and assets test reduction rate and a subsequent reduction in the part-pension cut-out thresholds. The changes are proposed to come into effect from 1 January 2017.
Pensioners impacted by the proposed changes to the Age Pension means test will be guaranteed eligibility for either the Commonwealth Seniors Health Card or the Health Care Card.
Changes Effective From 1st July 2017
Social Security and Family Assistance Changes
Families with incomes of up to $60,000 (in 2013/14 dollars) will be eligible for a Child Care Subsidy of 85 per cent of the lesser of the actual child care fees and a benchmark price per child. The subsidy rate will reduce to 50 per cent for families with income of $165,000 and above. The subsidy amount will be capped at $10,000 per child for families with income of $180,000 and above. No cap will apply for family incomes of less than $180,000
Other measures include a two year pilot program to extend subsidy support for home care services provided by nannies and a child care safety net for disadvantaged families.
GST Related Measures
Cross border supplies of digital products and services - From 1 July 2017, GST will be extended to cross border supplies of digital products and services imported by customers.
Under the current law, digital products and services imported by consumers are not subject to GST. This results in forgone GST revenue to the States and Territories and places domestic businesses (which generally have to charge and remit GST on the digital products and services they provide) at a tax disadvantage compared to overseas businesses.
Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.