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www.hanrickcurran.com.au
2015 Post Budget & Pre Financial Year EndTaxation Update
Jamie TowersTaxation Partner
3 June 2015
Backdrop
2experience. new thinking
Estimated 2015/16 deficit of -$35.1 bn representing 2.1% of GDP
A reduction of $6bn from 2014/15 (but an increase of $18 bn on previous est.)
Forecast to return to surplus in 2019/20 (as expected last year)
Payments remain high at 25.9% of GDP, falling to 25.3% over the forward est.
Concerning proportion of recurrent expenditure, not capital investment
Stable spending and recovery in receipts make much of the recovery in the budget position
Recovery in receipts driven by employment growth on the back of real GDP growth of:
2.75% in 2015/16; 3.25% in 2016/17
This leaves the budget susceptible to future shocks
FY
1971 FY
1976 FY
1981 FY
1986 FY
1991 FY
1996 FY
2001 FY
2006 FY
2011 FY
2016
-5.00%
-3.75%
-2.50%
-1.25%
0.00%
1.25%
2.50%
3.75%
5.00%Budget Balance
FY
1997 FY
2000 FY
2003 FY
2006 FY
2009 FY
2012 FY
2015 FY
2018
20.00%
21.00%
22.00%
23.00%
24.00%
25.00%
26.00%
27.00%Payments & Receipts
Receipts Payments
Budget Insights
6experience. new thinking
Very little for non-small business Tax Discussion Paper released in March – little
substance Green ‘ideas paper’ to be released later this year White Paper with policies to take to next election –
due 2016
Small Business
7experience. new thinking
Definition of “small” business: Aggregated turnover of less than $2 Million (when
aggregated with other businesses under same control)
Turnover test applies to current or previous year $2 Million threshold has been in place since at least
2001 with no indexation. Time to change?
Small Business
9experience. new thinking
1.5% Company Tax Cut to 28.5% from 1/7/2015
Franking % to remain at 30%
Will result in some unfranked dividends
Small Business
10experience. new thinking
Unincorporated Small Business Discount 5% discount on Business income in unincorporated
entities flowing to individuals Capped at $1,000 per individual
Small Business
11experience. new thinking
Unincorporated Small Business Discount
Example:
Family business in family trust earns $80,000 of business income and distributes to Jack.
Jack’s normal tax on $80,000 would be $17,534.
Jack receives a tax offset providing a 5% discount of $876, meaning net tax payable of $16,658.
Small Business
12experience. new thinking
<$20,000 Small Business Asset Write-off Previously been as high as $6,500 under previous
Government (Carbon Tax Initiative) but reverted back to $1,000 last year
Any individual assets purchased with a value less than $20,000 (+ GST)?
Deduction available in year asset is first used or installed ready for use
Applies from Budget night until 30 June 2017
Small Business
13experience. new thinking
<$20,000 Small Business Asset Write-off Excluded Assets – Horticultural plants, Capital
Works; Assets allocated to Pools (ie software depreciation pool), assets under lease – Financing Impact!
Primary Production assets – can choose write-off or specific primary production rules
Assets Exceeding $20,000 get a 30% write-off (15% first year)
Small Business
14experience. new thinking
<$20,000 Small Business Asset Write-off Caution! ATO Will be closely monitoring new ABN
applications and will likely create an audit program for contractors (who are otherwise just employees)
Small Business
15experience. new thinking
Immediate Deduction for Professional Expenses to establish a business Current rules provide write-off of business set up
costs over 5 years From 1/7/2015 – immediately deductible
Small Business
16experience. new thinking
CGT Relief for Change to Entity Structure (from 1/7/2016)
Currently roll-over relief only available for restructure into a company
Will allow changes to any structure Silent on treatment of revenue assets Stamp (Transfer Duty) still applies in most States
Small Business
17experience. new thinking
FBT Exemption - Portable Electronic Devices Current rules – FBT exemption for the first device
only each year where devices have ‘substantially identical features’
Small Business
18experience. new thinking
FBT Exemption - Portable Electronic Devices ipad and iphone have similar features Tablets and Laptops have similar features Small business will be able to provide more than 1
device without being subject to FBT Still a real issue for other businesses
Small Business
19experience. new thinking
Starting a Business to be streamlined – all registrations in a single online portal (business.gov.au)
Interaction with ASIC or ATO just using ABN Raising funds to become simpler – Corporations Act
to be amended to allow easier access to Crowd-source funding
AgriBusiness
20experience. new thinking
Farmers able to write-off capital expenditure on fencing and water facilities
Write-off Fodder Storage over 3 years
Other Business
21experience. new thinking
R & D - $100M Expenditure Cap Government still aiming for 1.5% reduction in tax
offset despite it failing to pass in an earlier bill.
Other Business
22experience. new thinking
Employee Share Schemes Rules will be fixed from 1/7/15 to ensure tax
consequences only when can sell shares to pay tax For some ‘small companies’ ($50 Million turnover) –
employees taxed as capital gain (incl 50% CGT discount) rather than as ordinary income
Other Business
23experience. new thinking
Earn-Out Rules Further exposure draft legislation introduced
recently Broad intent to treat additional consideration under
‘look through’ earnout rights as part of main capital gain
Requires amendment of tax return No change to tax treatment of non-look though
earnout rights
Other Business
24experience. new thinking
ATO – Power to fix law not operating as intended Power to Commissioner to issue a legislative
instrument with the effect of removing unintended outcomes of legislation
Commonwealth Penalty Units – up to $180 from 31 July 2015
GST
25experience. new thinking
Netflix Tax – Overseas companies providing digital content to Australian consumers will become subject to GST (from 1/7/2017)
Requires support of States Collection and its enforcement is the main problem
as no requirement for overseas business to register
GST
26experience. new thinking
Reverse Charge for Going Concern and Farmland Exemption not proceeding (policy announced last year)
No GST on taxable importations of < $1,000. (Again collection is a problem)
CHARITIES & NOT FOR PROFITS
27experience. new thinking
FBT Cap on ‘Meal Entertainment Expenses’ Currently no FBT if benefits are below either a
$17,667 cap or a $31,177 cap. PLUS no FBT on any Meal Entertainment Expenses
From 1 April 2016 – proposed $5,000 cap on meal entertainment. Excess counts towards other caps.
Budget Paper indicates “all use of meal entertainment benefits will become reportable”
Families – Child Care
29experience. new thinking
Current Child Care Benefit, Child Care Rebate and Jobs, Education and Training Child Care Fee Assistance programmes abolished. Replaced with single means tested Child Care Subsidy
Subject to a new activity test for up to 100 hours of subsidised care per child per fortnight, paid directly to approved care service providers
Up to 24 hours per fortnight also provided where family income < $65,000 per year, do not meet the activity test – equivalent to two 6-hour sessions
All subsidies will be linked to ‘no jab, no pay’ from 1 January 2016, unless exempt on medical grounds
Families – Child Care
30experience. new thinking
Family Income Thresholds up to $65,000 the Child Care Subsidy will be 85% of
the fee (up to a benchmark price); will reduce to 50% for family incomes of $170,000
and above a cap of $10,000 per child for the total value of
subsidies for family incomes of $185,000 and above
Families – Child Care
31experience. new thinking
Family Income Thresholds
Family Income Per Child Subsidy CapUp to $65,000 85% of fee# n/a
$65,000 - $170,000 Tapers from 85% - 50% n/a$170,000 - $185,000 50% n/a
>$185,000 50% $10,000 pa# % of lower of fee or benchmark price
Activity (hours worked per fortnight) Subsidised hours (per fortnight)
8-16 up to 36 17-48 up to 72 49+ up to 100
Families
32experience. new thinking
Funding linked to passage of Family Tax Benefits measures from 2014 Federal Budget (Legislation stalled in Senate) FTB Part B primary earner income limit will be reduced to $100,000 from
$150,000 FTB Part B payment will be limited to families whose youngest child is under 6
years of age ( 2 year transitional arrangement for families with the youngest child aged 6 and over on 30 June 2015)
The FTB Part A Large Families Supplement will be limited to families with 4 or more children.
The FTB Part A per child add on to the higher income free threshold removed.‑ FTB Part A payment of $750 introduced for single parents on the maximum
rate of FTB Part A whose youngest child is aged between 6 and 12 years from the point they become ineligible for FTB Part B.
The FTB Part A and Part B end-of-year supplements will return to the original amounts of $600pa for each FTB Part A child and $300pa for each FTB Part B family and will cease indexation.
Individuals
33experience. new thinking
Maybe a tax cut? Tax cuts legislated from Labor Government Bill to repeal not yet passed (only effects low income individuals – no real change
above $80,000 of income)
Individuals
34experience. new thinking
2012/13 2015/16 Legislated 2015/16 New Tax Threshold Rate Threshold Rate Threshold Rate Thresholds
1 18,201 19% 19,401 19% 18,201 19%2 37,001 32.5% 37,001 33% 37,001 32.5%3 80,001 37% 80,001 37% 80,001 37%4 180,001 45% 180,001 45% 180,001 45%
Low Income Tax Offset (LITO) $445
#1.5% above
$37,000 $300
#1% above
$37,000 $445
#1.5% above
$37,000
Effective tax free threshold 20,542 20,979 20,542 # Rate at which LITO reduced above threshold
Individuals
35experience. new thinking
HELP Debts – repayments apply to overseas debtors If live overseas for > 6 months and have worldwide
income above HELP repayment threshold ($54,126 - 2016), then required to register with ATO and make repayments from 1/7/2017
Year End Planning
36experience. new thinking
If possible – Defer income until next financial year Bring forward expenditure Review & write-off bad debts Make super contributions before 30 June 2015 Prepayments are effective for individuals and small
business Interest on Investment Loans Business Expenses
Year End Planning
37experience. new thinking
Take the benefit of the $20,000 asset write-off For assets costing > $20,000 buy before 30 June as
still get 15% depreciation even if held for 1 day (eg – purchase a car for $50,000 on 30 June 2015.
you add it to the small business pool and get a $7,500 depreciation deduction for 1 day)
Year End Planning
38experience. new thinking
If you are able to income split, take into account: Top Marginal Tax Rate - $180,000 Superannuation (Division 293) tax - $300,000 HELP repayment – 2014/15 - $53,345
Year End Planning
39experience. new thinking
Trust Distributions – Check Trust deed for distribution resolution requirements
Ensure the trustee makes an income resolution and records in writing on or before 30 June 2015 (or other earlier date specified in deed)
If any Division 7A loans from private companies – ensure you have made minimum repayments and charged interest
Ultimate Tax Deduction
40
experience. new thinking
Give the gift that keeps on giving Donations over $2 to Deductible Gift Recipients
allow you to FEEL GOOD about helping the chosen charity AND you get to reduce your tax.
Hanrick Curran assists many fantastic charities – see details on our website
DisclaimersThis document contains information in summary form and discusses proposed but not legislated rules and is therefore intended for general guidance only.
It is not intended to be a substitute for detailed research or the exercise of professional judgement. It does not purport to be comprehensive or to render professional advice. The reader should not act on the basis of any matter contained in this publication without first obtaining specific professional advice.
We believe that the statements made by us in this document are accurate but no warranty of accuracy or reliability is given. Our conclusions are based on interpretations of accounting standards and other relevant professional pronouncements and legislation current as at the date of this document. Should the interpretations, accounting standards, other relevant professional pronouncements or legislation change, our conclusions may not be valid.
© Hanrick Curran, June 2015
All rights reserved
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