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2016 Federal Budget Synopsis

As another financial year draws to a close, inevitably another federal budget has been delivered. We provide below a brief summary of the changes that have been announced in last night’s budget together with a more detailed explanation of the various announcements and how they will impact you, your business and your superannuation.

Small Business

The small business entity turnover threshold will be increased from $2m to $10m from 1 July 2016 for the purposes of accessing certain existing income tax concessions. The increased threshold will not apply for the purposes of accessing existing small business capital gains tax concessions.

The unincorporated small business tax discount will be increased in phases over 10 years from the current 5% to 16%, first increasing to 8% on 1 July 2016. The current cap of $1,000 per individual for each income year will be retained.

GST reporting requirements for small businesses will be simplified from 1 July 2017.

Other enterprises

The company tax rate will be progressively reduced to 25% over 10 years.

Individuals and families

The threshold at which the 37% marginal tax rate for individuals commences will increase from taxable incomes of $80,000 to $87,000 from 1 July 2016.

The low-income thresholds for the Medicare levy and surcharge will increase from the 2015/16 income year.

Continuation of the pause in the indexation of the income thresholds for the Medicare levy surcharge.

Superannuation

The threshold at which high income earners pay additional contributions tax will be lowered to $250,000 from 1 July 2017. The annual cap on concessional superannuation contributions will also be reduced to $25,000.

The tax exemption on earnings of assets supporting Transition to Retirement Income Streams will be removed from 1 July 2017.

A lifetime non-concessional contributions cap of $500,000 will be introduced.

The current restrictions on people aged 65 to 74 making superannuation contributions for their retirement will be removed from 1 July 2017.

Individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years, with effect from 1 July 2017.

From 1 July 2017 all individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions.

A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners from 1 July 2017.

The income threshold for the receiving spouse (whether married or de facto) of the low income spouse tax offset will be increased to $37,000 from 1 July 2017.

A balance cap of $1.6m on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase will be introduced from 1 July 2017.

GST and other indirect taxes

GST will be extended to low value goods imported by consumers from 1 July 2017.

Please note that the above budget announcements are only proposals at this stage and will require enactment prior to becoming law. Therefore, the information in this synopsis is to be treated as a general overview of the proposals and may be subject to change prior to becoming law.

The measure will apply from 1 July 2016. For the budget in detail please see the pdf.

For more information contact either Brendan Podevin or Cameron Wilson on 07 3360 9600 or visit hwone.com.au

© HW One May 2016