The 2016-17 Federal Budget is a budget of targets – broad targets to boost business and innovation and the narrow revenue targets of the wealthy and multi-nationals. It’s a big, long-term crafted budget designed to give enough pre-election glow but with structural measures to reign in spending and reduce concessions.
At one end, the Budget contains board measure to bolster business, investment and innovation including tax cuts and a number of tax measures enabling and freeing up alternate funding and investment sources for business.
At the other end are significant reforms restricting access to superannuation concessions as well as a stronger crackdown on multinationals diverting profits outside Australia.
To police the new revenue measures, the ATO gets and extra $678.9 million to establish a new Tax Avoidance Taskforce.
Plus, the Budget allows for a $1.6 billion decisions taken but not yet announced” election war chest.
- Company tax rate reduced to 27.5% from 1 July 2016 with a plan to reduce down 25% within the next 10 years. Franking credits will still be calculated with reference to the amount of tax paid by the company paying the dividends.
- From 1 July 2016 an increase in tax discount for unincorporated small businesses will be 8% and to increase incrementally to 16% by 2026-27.
- Small business entity threshold increase from $2m to $10m from 1 July 2016
- $1k GST exemption on imported goods abolished from 1 July 2017
- UK style diverted profits tax to reign in multinationals
- Business incentives with further bolsters to Innovation and finance technology
- $500,000 lifetime non-concessional contributions cap from Budget night (3 May 2016). Applies to all non-concessional contributions made on or after 1 July 2007.
- Reduction in concessional contribution cap from 1 July 2017:-
- Current concessional cap < 50 yrs is $30,000. From 1 July 2017 decreases to $25,000
- Current concessional cap ≥ 50 yrs is $35,000. From 1 July 2017 decreases to $25,000.
- Tax exemption on earnings supporting transition to retirement income streams (TRIS) removed from 1 July 2017.
- 30% tax on super contributions of high income earners with a combined income and superannuation contribution of more than $300,000 has been extended reducing to an income threshold of $250,000 from 1 July 2017.
- Tax free super balances capped at $1.6m from 1 July 2017.
- Anti-detriment provisions removed from 1 July 2017.
- Tax deductions on super contributions expanded for individuals aged up to 75 years from 1 July 2017 for personal superannuation contributions up to the concessional cap. No longer necessary to pass a 10% test in order to claim.
- Tax back for low income earners contributing to super up to a cap of $500 which applies to members with an adjusted taxable income up to $37,000 that have had a concessional contribution made on their behalf.
- Removing contribution restrictions for those 65 to 74 including a work test.
- Low-income spouse superannuation tax offset income threshold will increase to $37,000 (from $10,800) from 1 July 2017.
- Choice in retirement income products extended to include deferred lifetime annuities and group self-annuitisation products from 1 July 2017.
Individuals & Families
- 5% personal income tax threshold increase from $80,000 to $87,000 from 1 July 2016. The new rates from 1 July 2016 are:-
|Taxable income||Tax rate from 1 July 2016|
|$0 – $18,200||0%|
|$18,201 – $37,000||19%|
|$37,001 – $87,000||32.5%|
|$87,001 – $180,000||37%|
|$180,001 and over||45%|
- These tax rates exclude the Medicare Levy and the 2% debt tax on high-income earners over $180,000 which will come to an end on 30 June 2017.
- Increase in the Medicare low-income threshold for singles, families and seniors and pensioners will increase:-
2015-16 income year threshold
- Singles – $21,335
- Couples (no children) – $36,001
- Additional amount of threshold for each dependent child or student – $3,306
- Single seniors and pensioners – $33,738
- Senior and pensioner couples with no children – $46,966
- Subsidies to create employment path for unemployment youth
- Child care reforms on hold until 1 July 2018 and Nanny Pilot Programmed extended for 6 months to 30 June 2018
- $678.9m ATO anti-avoidance taskforce
- Tobacco excise adds $4.7bn. Indexation increase starting 1 September 2017 for 4 annual increases of 12.5% per year until 2020. Duty free allowance limited to 25 cigarettes down from 50 cigarettes from 1 July 2017.
- GST will now apply to all imported consumer goods
- Deregulation of Universities dropped