Following the handing down of Joe Hockey's second budget we have pleasure in providing you with a summary of the key points that will affect the majority of our clients.
Please find :
· below a brief 2015 Budget Summary
· please click this link for a detailed budget from Thomson Reuters
The Treasurer handed down his second Federal Budget.
The Budget targets social security benefits in order to ensure that those with the greatest need receive those benefits. It also focuses on providing incentives for small business.
The social security measures announced before the Budget were implemented as expected,
including changes to the assets test tapering rate. In his Budget speech, the Treasurer reiterated the Government's stated position that there will be no new taxes on superannuation under this
Government. Instead, many of these policies will take effect following the next election.
Unlike last year, this Budget made several key commitments to supporting small business. Small
businesses with aggregate annual turnover of less than $2m are the big winners with reduced tax
rates for companies and a 5% discount on tax for sole traders – small businesses are clearly the
big hope for economic growth and increasing employment.
There are always winners and losers and this year it is no different. There will be a number of
part-pensioners who will likely become forced self-funded retirees from 1 January 2017. The
reason will not be because they have excessive assets, but because of the changes to the asset
In changing the asset taper rate, this Government is amending a policy change made by the
previous Coalition Government in 2006. The Howard Government opened up access to the Age
Pension to self-funded retirees with a reduction in the taper rate from $3 per fortnight for each
$1,000 of extra assets to $1.50. This decision was made when interest rates were much higher
than they are today.
Additionally, the Government is implementing its announced child care reforms, including a
$4.4 billion increase in funds to provide a Child Care Subsidy, a two-year Nanny Pilot Program,
and a Child Care Safety Net for disadvantaged and vulnerable families.
Overall, the Budget appears to make fewer and better-targeted changes to savings and
expenditure, and implements key policy measures aimed towards improving economic growth
and labour participation.
Supporting Small Business
Tax cuts and discounts
The Government will provide a tax cut for all small businesses with aggregated annual turnover of less than $2m of
1.5%. This will reduce the company tax rate for small businesses from 30% to 28.5% for the 2015-16 financial year.
Individual tax payers (sole-traders and partners within a partnership) with an unincorporated business that has an
aggregated annual turnover of less than $2m will be eligible for a small business tax discount. The discount will be
5% of the income tax payable on the business income received and will be capped at $1,000 per individual per year.
The discount will be delivered as a tax offset.
Capital gains tax roll-over relief for changes to entity structure
The Government will allow small businesses with an aggregated annual turnover of less than $2m to change legal
structure without attracting a capital gains tax liability at that point.
This measure will be available for businesses that change entity type from 2016-17.
Changes to the FBT system for work-related electronic devices
The Government will allow a FBT exemption from 1 April 2016 for small businesses with an aggregated annual
turnover of less than $2m. This FBT exemption will apply to those small businesses that provide employees with
more than one qualifying work-related portable electronic device.
Immediate tax deduction for items valued less than $20,000
The Government will allow small businesses with aggregated annual turnover of less than $2m, the immediate
deduction of assets for that they start to use or install ready for use, provided the asset cost less than $20,000.
This will apply to assets acquired and installed ready for use between 7.30pm 12 May 2015 to 30 June 2017.
The small business simplified depreciation pool can also be immediately deducted if the balance is less than $20,000
over this period (including existing pools).
The Government is encouraging start-ups by implementing the following incentives:
· Immediate deduction of professional expenses incurred when beginning a business, such as legal expenses
on establishing a company, trust or partnership. This replaces the existing rule which requires writing them
off over 5-years.
· Streamlined business registration processes will make it quicker and simpler to set up a new business – a
single online registration site will be established to facilitate business registration.
· Removing obstacles to crowd-sourced equity funding to help promote small businesses access to finance.
The Government has held firm on its commitment not to announce any adverse superannuation changes in this term of
office. However, superannuation will form part of the Tax White Paper discussion and the next election campaign.
Terminal medical condition
The Government will extend access to superannuation for people with a terminal medical condition from 12 months to 24
The process of requiring two medical practitioner certificates (including one from a specialist) and the tax-free treatment of
funds accessed from superannuation under this condition will remain unchanged.
Full cost recovery of superannuation activities
The Government will increase the supervisory levies paid by financial institutions. This will fully recover the cost of
superannuation activities undertaken by the Australian Taxation Office and the Department of Human Services, consistent
with the Government's cost recovery guidelines.
The measure is expected to raise additional revenue of $46.9 million over four years from 2015-16.
Cutting red tape – lost and unclaimed superannuation
The Government will implement a package of measures that will reduce red tape for superannuation funds and individuals.
The measure removes redundant reporting obligations and streamlines lost and unclaimed superannuation administrative
arrangements. The changes will make it easier for individuals to claim their lost and unclaimed superannuation.
The measures will have effect from 1 July 2016.
Social Security and Family Payments
Low Income Support – cessation
The Government will cease the Low Income Supplement from 1 July 2017.
Recipients of most Government payments will continue to receive carbon tax compensation through the Energy
Supplement, which provides up to $14.10 per fortnight depending on individual circumstances.
Not proceeding with the measure to reset the income test deeming rate thresholds.
Personal Income Tax
Medicare Levy low-income threshold for families
The Government will increase the Medicare Levy low-income threshold for singles, families and single seniors and
pensioners from 2014-15.
The threshold for singles will be increased to $20,896. For couples with no children, the threshold will increased to $35,261
and the additional amount of threshold for each dependent child or student will be increased to $3,238.
For single seniors and pensioners, the threshold will be increased to $33,044.
Work-related car expenses
The Government will make changes to the calculation method for work-related car expense deductions.
The '12% of original value method' and the 'one-third of actual expenses method' will be removed.
The 'cents-per kilometre method' will be modernised by replacing the three current rates based on engine size with one rate
set at 66 cents per kilometre to apply to all motor vehicles, irrespective of engine size.
The 'log-book' method will be retained and these changes will not affect leasing and salary sacrifice arrangements.
Zone Tax Offset
The Zone Tax Offset applies to individuals in recognition of the isolation, uncongenial climate and high cost of living
associated with living in identified locations. Eligibility is based on defined geographic locations.
The Government will now exclude 'fly-in fly-out' and 'drive-in drive-out' (FIFO) workers from the Zone Tax Offset where
their normal residence is not within a 'zone'.
This measure will take effect from 1 July 2015.
Changes to residency tax rules for temporary holiday workers
The Government will change the tax residency rules from 1 July 2016 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 in Australia.
This means they will be taxed at 32.5% from their first dollar of income up to $80,000.
Cap for not-for-profit salary sacrificed benefits
The Government will cap the amount employees of public benevolent institutions and health promotion charities can salary
sacrifice for meal entertainment benefits.
The cap will be a separate single grossed up amount of $5,000. The amounts exceeding this cap 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 and this measure will apply prospectively from 1 April 2016.
Employee share schemes
The Government will implement a variety of measures that affect employee share schemes. The measures will:
· exclude eligible venture capital investments from the aggregated turnover test and grouping rules (for the start-up concession);
· provide the capital gains tax discount to employee share scheme 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
· allow the Commissioner of Taxation 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.
A number of other amendments accompany these changes to make employee share schemes more accessible for Australian
businesses and their employees.
These changes will take effect with the remainder of the enabling legislation from 1 July 2015.