The Federal Budget 2015
It’s that time of the year again where the number crunches in parliament put their heads together to release the Federal Budget.
It seems that the focus of this year’s Budget is to spend, spend, spend…… with the government targeting productivity to keep the economy ticking over.
The small business sector has profited the most, with businesses turning over of less than $2 million receiving a reduced tax rate of 1.5% for those incorporated (companies) & 5% tax discount for unincorporated (sole traders, partnership & trusts).
Additionally, businesses with an aggregated turnover of under $2 million can now immediately deduct assets costing less than $20,000. These taxpayers have been given the license to splurge. However, these initiatives are subject to the amending legislation passing through Parliament, so just hold off on buying the next piece of equipment or new motor vehicle.
For those thinking of starting up a new business, you will be able to immediately deduct a range of professional expenses such as cost of professional, legal and accounting advice. If you are already in business, you will now be able change company structure without triggering Capital Gains Tax. Consequently, other tax issues may still arise, so please give us a call.
Fringe Benefits Tax Changes
New measures have been introduced for portable electronic devices used primarily for work purposes. Previously, devices such as tablets, laptops, phones and other devices had to be substantially different. This change should address some of the uncertainty that has arisen when applying the rules to that are hard to distinguish from each other in terms of functionality.
The ‘Netflix’ Tax
The ‘Netflix Tax’ will broaden the GST system to digital products and other imported services supplied to Australian consumers by foreign entities. Those business who supply digital products, such as streaming or downloading of movies, music, apps, games, e-books as well as other services such as consultancy and professional services will received similar GST treatment whether they are supplied by a local or foreign supplier. Unanimous agreement of the States and Territories is required if this change to legislation is to go ahead.
Unfortunately for importers, the Import Processing Charge (IPC) and import-related licence charges, are about to increase. The IPC will be restructured to recover the cost of cargo and trade-related reform activities, remove the differential charges for post, air and sea cargo declarations, and introduce higher charges for manual documentary declarations.
Licence charges will be restructured for brokers, depots and warehouses, including introducing warehouse and broker licence application charges, increasing the broker licence renewal charge and introducing a warehouse licence variation charge.
Employee Share Schemes
A number of amendments are going to be implemented to make employee share schemes more accessible for Australian businesses and their employees.
Changes are as follows:
– Exclude eligible venture capital investments from the aggregated turnover test and grouping rules (for the start-up concession);
– Provide the CGT 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
– The Commissioner can 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.
These changes will take effect with the remainder of the enabling legislation from 1 July 2015 and are estimated to have a small but unquantifiable cost to revenue over the forward estimates period.
Work Related Deductions
Individual taxpayers have been snubbed by the changes to the work related deductions for car expenses. 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 with one rate set at 66 cents per kilometre to apply for all motor vehicles, with the Tax Commissioner responsible for updating the rate in following years. The ‘logbook method’ of calculating expenses will be retained.
In light of this, if you haven’t got a logbook in place, we suggest you start one as soon as possible as the tax benefits will most likely outweigh what can be claimed using the ‘cents per kilometre method.’
Pensions Asset Test Changes
The Government will increase the asset test thresholds along with the withdrawal rate at which pensions are reduced once the threshold is exceeded.
For pensioners with modest assets, the change will increase their pensions. The value of assets you can have in addition to your family home in order to qualify for a full pension will increase from $202,000 to $250,000 for single home owners and from $286,500 to $375,000 for couple home owners.
Pensioners who do not own their own home will also benefit by an increase in their threshold to $200,000 more than homeowner pensioners. This increases the gap between homeowners and non-homeowners thresholds by more than a third, recognising their higher living costs.
All couples who own their own home with additional assets of less than $451,500 will get a higher pension. Couples who don’t own their own home and have asset holdings up to $699,000 in January 2017 will be better off. For singles the maximum threshold point, below which pensioners will be better off, will be $289,500 for home owners and $537,000 for non-homeowners.
Changes to Child Care
A new single Child Care Subsidy (CCS) will be introduced to replace the existing Child Care Benefit, Child Care Rebate and the Jobs, Education and Training Child Care Fee Assistance payments. The current child care related benefits will cease on 30 June 2017.
The new subsidy is means and activity tested to align it with hours of work, study etc. For families with an annual income of up to $65,000 who meet the activity test, the subsidy covers 85% of the actual fee paid up to an hourly fee cap. The subsidy then tapers to 50% for families with annual incomes of $170,000 where it stays until family income reaches $185,000. Families with income levels of $185,000 or more will have the CSS capped at $10,000 per child per annum.
Additional funding will provide targeted support to disadvantaged or vulnerable families via the assistance of programs provided through the Child Care Safety Net. Finally, families will no longer be eligible for subsidised child care or the Family Tax Benefit Part A end of year supplement unless their child is up to date with all childhood immunisations.
As always, this release give us the opportunity for discussion & criticism, leaving the public to evaluate the proposed changes & assess whether or not they are better off.
How’d you fare?
Michael Franco B.Bus ASA
Accountant – Xero Certified Advisor