How you might be impacted by the 2016 Federal Budget
Please call our office if you are seeking clarification as to whether proposed changes may impact you positively or negatively, ph: 03 9397 4552.
- From 1 July, 2016 small and medium-sized businesses will receive a tax cut, with their company tax rate falling to 27.5%. The Government has also announced a timetable to lower corporate tax for all businesses with the turnover threshold for the reduced tax rate rising incrementally to $100 million in 2019-20.
Turnover Threshold Effective Date $10 mil 1 July, 2016 $25 mil 1 July, 2017 $50 mil 1 July, 2018 $100 mil 1 July, 2019
The Government also plans to keep raising the maximum turnover threshold for the 27.5% corporate tax rate until all businesses are included by 2023-24. By 2026-27 the intention is to lower the corporate tax rate to 25% for all businesses.
Non-incorporated businesses do not miss out on tax relief, with those turning over less than $5 million getting an 8% discount up to a maximum value of $1,000, effective 1 July, 2016.
- All small businesses with a turnover of less than $10 million will also now be eligible for the instant tax write-off for equipment purchases of up to $20,000 made next financial year.
- Increased tax on super contributions for high income earners – Currently, when personal income exceeds $300,000 the tax payable on any superannuation contributions increases from the standard concessional tax rate of 15% to 30%. The government has now proposed to decrease this income threshold from $300,000 to $250,000 per year from 1 July, 2017.
- Concessional contribution caps – Currently, the annual cap on concessional (before-tax) contributions is $30,000 for under-50s and $35,000 for those aged 50-plus, these will be both decrease to $25,000 per year effective 1 July, 2017. These concessional contributions are generally superannuation guarantee (SG) contributions and salary sacrifice.
- Non-concessional contribution caps – Current legislation allows for Non-concessional (after-tax) contributions of $180,000, or $540,000 every three years for people under aged 65. These contributions are usually voluntary and effective 3 May, 2016 will also be subject to a lifetime cap of $500,000, taking into account all non-concessional contributions made since 1 July, 2007.
- Catch up contributions for individuals who have time out of the workforce– From July 1, 2017 the Government will allow individuals to make catch-up concessional super contributions for those people with balances under $500,000. This measure is to allow people with lower contributions, interrupted work patterns, or irregular capacity to make contributions to make catch up payments to their super.
- Low income superannuation tax offset – A new scheme will be introduced that provides a tax offset of up to $500 p.a. on concessional superannuation contributions for individuals earning less than $37,000 per year, effective 1 July, 2017.
- Transfer of superannuation into retirement phase – From July 1, 2017 a cap of $1.6 million will be placed on the transfer of superannuation balances into the tax-free retirement phase (Pension accounts). Any existing Pension accounts with balances beyond $1.6 million will have to be transferred into accumulation accounts and will be subject to up to 15% tax.
- Extended ability to make contributions – From 1 July, 2017 the Government is extending the ability for all individuals aged between 65 – 74 to make concessional tax contributions to their superannuation, and to make or receive payments from their spouse, without having to meet the current work test criteria.
- Spouse contribution tax offset – The tax offset for spouse contributions where the spouse income was previously less than $10,800 has now increased to $37,000 per year effective 1 July, 2017.
- Easing of restrictions on tax deductibility of personal super contributions– From 1 July, 2017 the Government will allow individuals regardless of employment status to make concessional super contributions up to the concessional cap (subject to 15% contribution tax). Individuals can claim a personal income tax deduction for personal super contributions.
- Transition to Retirement (TTR) Accounts – The existing tax exemption on investment earnings for supporting TTR income streams will be removed from 1 July, 2017
. This means members with a TTR accounts will now have their investment earnings subjected to 15% tax.
- The salary threshold where the 37% tax rate kicks in will be raised from $80,000 to $87,000 p.a. This measure is designed to reduce the impact of ‘bracket creep’, where inflation pushes income earners into a higher tax bracket.
- The existing temporary deficit levy applying to people earning more than $180,000 per annum will be removed from July 1, 2017.