Small businesses, jobs and families were front and centre in this year’s budget, which focused on plans to restore confidence in the economy. Here we take a look at what the key changes are.
It’s important to note that the Budget announcements are still proposals at this stage.
The Budget contains a range of measures to assist small businesses. Generally, this applies to businesses with a turnover of less than $2 million.
From 1 July 2016, the Government will allow all primary producers to immediately deduct expenses on fencing and water facilities. They will also allow primary producers to depreciate over three years all money spent on fodder storage assets such as silos and tanks used to store grain and other animal feed.
The Government is looking to implement a Multinational Anti‑Avoidance Law, to stop large multinational companies from avoiding Australian taxation obligations.
The Government has proposed changes to the asset test thresholds which help determine a person’s pension entitlement as well as changes to the asset test taper rate (the fortnightly amount by which a person’s pension entitlement decreases under the assets test). The taper rate is proposed to increase from $1.50 to $3 per $1,000 of assets over the lower threshold.
Under the proposed changes, pensioners with lower levels of assets could see an increase to their entitlement. However, pensioners with higher asset amounts could see a significant reduction or complete loss of their age pension entitlement. To qualify for a part pension your assets outside the family home will need to be less than $823,000 for couples and $547,000 for single retirees. These thresholds are dropping from $1.15 million for couples and $775,000 for singles.
All people who lose entitlement to the pension due to the scaling back of the maximum asset threshold will be guaranteed eligibility for the Commonwealth Seniors Health Card (CSHC) or the Health Care Card, providing concessional access to pharmaceuticals.
New aged care residents who enter aged care from 1 January 2016 will have any rental income earned from renting out their former home included in the calculation of their means tested amount, which is used to determine ongoing aged care fees.
This differs from the current rules, where residents who pay some or all of their accommodation payments as periodic payments are entitled to an exemption on the rental income from their former home when calculating their means tested amount for aged care fee purposes.
There is a focus on support for families in this year’s Budget. The Government is looking to spend $3.5 billion over five years on child care assistance including a new child care subsidy, from 1 July 2017, based on family income.
Families earning $65,710* or less will receive a subsidy of 85% of their child care fees (up to an hourly cap). The subsidy gradually tapers to 50% for families earning less than $185,710*. Families earning $185,710 or more will have a $10,000 annual cap on the total amount of assistance provided per child per year.
From 1 July 2016, “double-dipping” of paid parental leave will be removed. Access to parental leave pay will be limited to individuals whose employer does not provide parental leave entitlements. In cases where individuals get less generous parental leave entitlements from their employer, the Government will top up the amount paid to be equal to the full amount available under the existing scheme.
This Budget is about restoring confidence in the economy. There are many new opportunities for starting new businesses and tax benefits for small business owners. Families with young children are also set to benefit with government subsidies relating to childcare. However, current and future retirees could lose their entitlement to the age pension from 1 July 2017.
While this is a general overview of the changes our next step at MSI Taylor is to embark on your personal tax planning – what you need to do before 30th June to pay less tax. To make the most out of these new budget measures expect your personal checklist of action items over the coming weeks.
*1 July 2017 amount referenced in Budget Paper – New Child Care support section.