– Change in small business entity (SBE) turnover threshold
Currently businesses with a turnover of less than $2 million are able to access small business income tax concessions. From 1 July 2016 the SBE turnover threshold is increasing from $2 million to $10 million. Therefore starting from 1 July 2016, business with less than $10 million turnover are entitled to the following small business concessions:
- Lower small business corporate tax rate at 27.5% (originally 28.5% in the 2015/16 year or 30% if not eligible for the SBE concessions)
- Simplified depreciation rules (as per Subdivision 328-D of ITAA 1997) – including the $20,000 asset immediate deduction until 30 June 2017
- Simplified trading stock rules (as per Subdivision 328-E of ITAA 1997) which gives business the option to avoid an end of year stocktake if the value of their stock has changed less than $5,000 in the financial year
- Have the option to account for GST on a cash basis and pay GST instalments as per ATO calculations
The increase threshold does not apply to business for the purpose of small business capital gains tax concessions. The capital gains tax concession will continue to apply for small business with a turnover of less than $2 million.
Small Business Tax Offset (SBTO) – the SBTO (5% tax deduction for unincorporated business) will be increased to 8% starting 1 July 2017. It will be limited to small business with a turnover of less than $5 million. The existing cap of $1,000 per an individual for each financial year is retained.
Individuals and Families:
– Individual income tax relief
Starting from 1 July 2016, the 37 per cent marginal tax rate for individuals will increase lower taxable income from $80,000 to $87,000. Therefore taxable income between $37,001 – $87,000 will be taxed at 32.5 per cent and 37 per cent for taxable income between $87,001 – $180,000.
– Medicare levy low income threshold change
The Medicare levy low income threshold will be as follows for 2015/16:
- Individuals $21,335 (previously $20,896)
- Families $36,000 (previously $35,261)
The family income threshold will be increased by $3,306 per each dependent child or student (previously $3,238).
Single seniors and pensioners with no dependents eligible for senior and pensioner tax offset will have the threshold increased from $33,044 to $33,738.
GST and Other Taxes:
– Applying GST to low value goods imported by consumers
From 1 July 2017, GST will be extended to low value goods imported by consumers. Overseas suppliers that have Australian turnover of $75,000 or more will be required to register for, collect and remit GST (under a vendor registration model) for low value goods supplied to consumers in Australia.
– Reduced concessional contribution cap
The existing concession cap is $30,000 for individuals under 50 years old and $35,000 for those over 50 years old. As of 1 July 2017, the cap will be reduced to $25,000 across all ages.
– Additional 15% contributions tax for high income earners (Division 293)
From 1 July 2017, the division 293 threshold will be lowered from $300,000 to $250,000. This means high income earners will have to pay 15% tax on any low tax contributions that exceeds the $250,000 threshold. The income calculation for the purpose of Division 293 includes:
- Taxable income
- Reportable superannuation
- Total net investments
- Reportable fringe benefits
– Catch-up concessional contributions
Starting from 1 July 2017, individuals with a superannuation balance of less than $500,000 are allowed to make additional concessional contributions if they have not reached their concessional contributions cap in previous years. Only unused amounts accrued from 1 July 2017 can be carried forward and can only be carried forward on a rolling basis over 5 consecutive years.
– Lifetime cap for non-concessional contributions
A lifetime non-concessional contribution of $500,000 has been introduced and commences from 7:30pm (AEST) on 3 May 2016. The $500,000 lifetime cap will take into account all non-concessional contributions from 1 July 2007.
Contributions made post 1 July 2007 and prior to the commencement date that have exceeded the $500,000 cap will be taken as having used up their lifetime cap. They will not be required to take the excess amount out of the superannuation system. Non-deductible contributions made after the commencement date that exceed the cap will be subjected to penalty tax arrangements.
The lifetime cap will replace the existing annual non-concessional cap of up to $180,000 per year (or $540,000 every 3 years under the bring-forward rule for individuals under the age of the 65).
– Changes to transition to retirement pensions
From 1 July 2017 the tax exemption on earnings of assets supporting transition to retirement income streams will be removed and instead to be taxed at 15%. This will apply irrespective to when the transition to retirement commenced.
– Contribution eligibility requirement changes for those aged 65 to 74
The current restrictions for people making voluntary contributions between the ages of 65 and 74 will be removed from 1 July 2017. This will allow individuals to make voluntary contributions without having to satisfy minimum work requirements.
– Introduction of a superannuation transfer balance cap
Starting from 1 July 2017, a $1.6 million superannuation transfer balance cap will be introduced on the total amount of accumulated superannuation that an individual can transfer into pension phase. Super fund members with existing pension account balances greater than $1.6 million will need to either:
- Withdraw the excess amount from their superannuation; or
- Transfer the excess back into an accumulation (taxed at a concessional tax rate of 15%)
– Personal superannuation contribution tax deductions
All individuals under the age of 75 (regardless of employment circumstances) will be able to claim an income tax deduction for personal superannuation contributions from 1 July 2017. To claim the tax deduction, individuals will need to lodge a notice with their superannuation to inform them of the individual’s intention to claim the deduction prior to lodging their tax return. These amounts will be part of the individual’s concession contribution cap and is subject to 15% contributions tax. Deductions are not applicable to certain prescribed fund contributions.
– Anti-detriment death benefit provision removal
From 1 July 2017, the anti-detriment provision will be removed.
– New low income superannuation tax offset (LITSO)
A low income superannuation tax offset will be introduced from 1 July 2017 to reduce the tax on superannuation contributions for low income earners. This will provide a non-refundable tax offset to superannuation funds based on tax paid on concessional contributions, up to a cap of $500 to members with adjusted income of up to $37,000 that have had concessional contributions made on their behalf.
– Increased access to spouse superannuation tax offset
From 1 July 2017 the low income spouse superannuation tax offset will be increased to $37,000 (from the current $10,800). The contributing spouse will be eligible for an 18% offset up to $540 per annum. The tax offset would reduce where the spouse’s income exceeds $37,000 and will be cut off at $40,000.
Note: The measures outlined in the Federal Budget 2016/17 are proposals only and may or may not be made into law
If you have any particular queries on the implications of these or other budget matters please contact us (03) 9370 1989.