Everyone from the young to the old, from the struggling to the well-off, will be impacted by the 2016 Federal Budget. So what does it mean for you? We’ve taken some of the key changes and summarised them below.
If you earn over $80,000 per year…
People earning between $80,000 and $87,000 per year have been given a tax cut as the government proposes changing the upper limit for the second highest tax bracket of 37 cents in the dollar from $80,000 to $87,000, resulting in a saving of up to $315 per year.
If you’re an investor in start-ups…
The Budget has extended the range of concessions available to angel investors in eligible companies including: reducing the holding period from 3 years to 12 months to access the 10 year CGT exemption, requiring the investor and innovation company to be non-affiliates and limiting the amount for non-sophisticated investors to $50,000 or less per income year to receive the tax offset.
If you’re an unincorporated small business…
The tax discount for unincorporated small businesses will gradually increase from 5% to 16% over the next 10 years. The new rate to apply from 01 July 2016 is 8% and the current cap of $1,000 per individual per year will still be retained.
If you’re a small to medium sized business owner…
Small and medium businesses are getting a tax cut with the company tax rate reducing to 27.5% from 01 July 2016 and increasing the threshold of businesses eligible for this rate to businesses with a turnover of up to $10 million. There is also a 10 year plan to gradually reduce the tax rate to 25% and apply this rate to all businesses by 2026/27.
The instant tax deduction for business equipment under $20,000 is being expanded to include businesses with a turnover of up to $10 million so more businesses will be eligible but it still expires on 30 June 2017.
Other changes to be implemented to help small business include simplified trading stock rules, trial of a simpler BAS, new FBT exemptions and a different method of calculating PAYG instalments.
If you’re a large business…
Businesses over $10 million in turnover will start to access the reduced company tax rate of 27.5% in stages over the next 10 years with all companies paying 25% company tax by 2016/27. Franking credits will still be calculated on the amount of tax paid by the company paying the dividends.
Australia also intends to introduce its own version of the UK’s diverted profits tax (DPT) which will apply to multinationals with global revenue of $1 billion or more, or an entity that is a member of a group of entities, consolidated for accounting purposes, which has annual global income of $1 billion or more. This is aimed at multinational companies which are trying to minimise tax by diverting profits off-shore. More information on the proposed DPT can be found on The Treasury website.
If you’re buying goods from overseas…
GST will be applied to all goods imported into Australia from 01 July 2017, meaning that goods purchased overseas will be treated the same way as goods purchased in Australia from a tax perspective. This will result in Australian retailers competing with overseas online retailers being more competitive.
There are some big changes proposed to be made to superannuation which you can read about here. For more information about how the proposed Budget will affect you and your business, please feel free to contact us.
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