BRM Holdich E-News

13 May 2015

2015/16 Federal Budget

Summary

The following sections summarise announcements made by the Federal Government in releasing the 2015 / 2016 Federal Budget on 12 May 2015.

The announcements include significant small business tax measures, including:

  • Increasing the immediate asset write off threshold to $20,000;
  • A 1.50% reduction in the company tax rate; and
  • Capital gains tax rollover relief for changes to business structure.

Other announcements were made in relation to primary producers accelerated depreciation, immediate deductibility of professional expenses for start-ups, fringe benefits tax portable electronic devices exemption, and not-for-profit sector salary sacrificed meal entertainment expenses.

No changes were announced to the already legislated personal income tax rates, or to the budget deficit levy that applies until 30 June 2017.  The methods by which work related car expenses are claimed will be simplified, and there will be only one cents per kilometre rate.

Despite recent speculation, there were no changes announced to the operation of the dividend imputation system.  Similarly, there was no new 0.05% bank deposits tax announced.

There were no announcements in the Federal Budget impacting superannuation, however tax reform, including the superannuation system, remains as an item for government consideration.  The Treasurer did state that there will be ‘no new taxes on superannuation’ under this Government.

The Federal Budget did confirm the earlier announcement that the Paid Parental Leave scheme would not proceed, and made a number of GST related announcements.

Please contact us should you require further information or would like to discuss any of these items.

Small Business Tax Measures

(Note: Small businesses are those with an aggregated annual turnover of less than $2 million)

Increase the small business immediate asset write off threshold to $20,000

Presently small businesses are able to claim an immediate tax deduction for assets costing less than $1,000.  The Federal Budget includes a measure to increase this threshold to $20,000.

The measure will apply for assets that small businesses acquire and install ready for use from 7:30pm 12 May 2015.  Eligible assets may include motor vehicles, equipment, servers, furniture and fittings, machinery etc.

Assets costing $20,000 or more will be included in the small business pool and depreciated accordingly.  We note that under this measure the balance of the small business pool (including an existing pool) can be immediately deducted if the pool balance is less than $20,000.

Note that this is a temporary measure and on 1 July 2017 the immediate deduction threshold will revert back to $1,000.

1.50% reduction in small business company tax rate

Presently companies are taxed at a rate of 30%.  From 1 July 2015 for small business companies this rate of tax will reduce to 28.50%.

However, the maximum franking credit rate will remain at 30%.

For unincorporated small businesses (such as trusts, partnerships and sole traders) a 5% tax discount will be available in the form of a tax offset to the individual ultimately declaring the business income.  Note that this tax offset will be capped at $1,000 per individual.

Capital gains tax rollover relief

Capital gains tax rollover relief will be available to small businesses which change the legal structure of their business from 1 July 2016.  This is an extension of the existing rollover that applies when restructuring into a company.

Effectively this measure enables small business to restructure as they find suitable without immediate capital gains tax consequences.

Note however that stamp duty will still need to be considered and will likely remain a cost when contemplating a change in business structure.

Other measures

Other measures announced in the Federal Budget impacting small business include:

  • Primary producers will be able to claim accelerated depreciation for water facilities, fodder storage and fencing from 1 July 2016. 
  • Professional expenses associated with starting a new business will be immediately deductible from 1 July 2015.  Such costs include legal and accounting advice or legal expenses to establish a trust, company or partnership.
  • From 1 April 2016 the fringe benefits tax (FBT) exemption for portable electronic devices used primarily for work will be expanded to include more than one qualifying device even if the devices have substantially similar functions.
  • Note also that for all not-for-profit employers new FBT rules will apply from 1 April 2016 to cap salary sacrificed meal entertainment benefits to a separate cap of $5,000 and make such benefits reportable.

Personal Taxation

Personal income tax rates

The Federal Budget does not include any changes to the already legislated personal tax rates, or to the budget deficit levy that applies until 30 June 2017.

The following table summarises the currently legislated rates (excluding Medicare levy but including the budget deficit levy):

2014 -2015

2015 - 2016
2016 - 2017

Threshold

Rate

Threshold

Rate

$18,201

19.00%

$19,401

19.00%

$37,001

32.50%

$37,001

33.00%

$80,001

37.00%

$80,001

37.00%

$180,001

47.00%

$180,001

47.00%

 

Note that the first threshold and second marginal tax rate increase slightly from 1 July 2015.

Work related car expenses

The methods by which work related car expenses are claimed will be simplified from 1 July 2015.  This simplification relates to both the methods available and the rate per kilometre.

There are presently four methods by which work related car expenses may be claimed, cents per kilometre, business use percentage, 12% of original value, and one third of actual expenses incurred.  From 1 July 2015 the 12% of original value and one third of actual expenses incurred methods will be discontinued.

Under the cents per kilometre method, there are presently three rates, 65 cents, 76 cents, or 77 cents depending on the size of the car’s engine.  From 1 July 2015 all claims under the cents per kilometre method will be at a rate of 66 cents per kilometre irrespective of the size of the car’s engine.

Other measures

Other measures announced in the Federal Budget impacting personal taxation include:

  • Despite recent media speculation, there were no changes announced to the operation of the dividend imputation system.
  • Changes to Medicare levy low-income thresholds.
  • Removal of the foreign income tax exemption for government employees delivering overseas assistance.
  • Restriction of eligibility to the zone tax offset.
  • Extension of Australian Defence Force employee exemptions.

Goods and Services Tax (GST)

The Federal Budget included a number of GST related announcements, including:

  • From 1 July 2017 offshore supplies of services and intangibles to Australian consumers will be subject to GST.
  • Previously announced measures to replace the current GST-free treatment for supplies of going concerns and certain farmland sales with a reverse charge will not proceed.
  • No changes were announced in regard to the low-value threshold for taxable importations.  Currently there is a GST threshold exemption of $1,000 that applies to purchases of imported goods.

Important: This is not advice.  Clients should not act solely on the basis of the material contained in this Bulletin.  Items herein are general comments only and do not constitute or convey advice per se.  Also changes in legislation may occur quickly.  We therefore recommend that our formal advice be sought before acting in any of the areas.  The Bulletin is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

 

BRM Holdich
Level 8, 420 King William Street
Adelaide SA 5000

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