Here’s a brief round-up of what last night’s budget means for you and your employees.
Remember that the proposals may change or be withdrawn as the legislation passes through parliament.
Instant asset write-off extension for small business
The government has announced a further extension to 30 June 2018 of the small business accelerated depreciation rules.
These rules include allowing businesses with annual aggregated turnover of less than $10 million to immediately deduct purchases of eligible assets costing less than $20,000 where first used or installed ready for use by 30 June 2018.
Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).
From 1 July 2018, the immediate deductibility threshold and the balance at which the small business simplified depreciation pool can be immediately deducted will revert back to $1,000.
Company tax rate reduction
Federal Parliament has now also finalised passage of legislation to reduce the company tax rate for small to medium size businesses.
The first step involves reducing (from 28.5%) to 27.5% for the 2016-17 income year the corporate tax rate for companies that are small business entities, defined as a business with an annual aggregated turnover of less than $10 million (up from the existing under $2 million for this purpose).
Other companies remain subject to the 30% corporate tax rate.
The second step involves subsequent increases in this annual aggregated turnover threshold so that progressively larger companies with annual aggregated turnover under $50 million will qualify for the 27.5% corporate tax rate.
For companies with annual aggregated turnover under $50 million the tax rate will progressively reduce to 25% from the 2026-27 income year.
Unincorporated businesses – annual aggregated turnover threshold
The annual aggregated turnover threshold from 1 July 2016 is to be increased to $5 million (up from $2 million) for unincorporated business looking to qualify for the small business income tax offset.
This small business income tax offset will progressively increase to 16% of an individual’s tax liability related to their net small business income by the 2026–27 tax year.
Skilling Australians Fund levy introduced
Businesses that employ foreign workers on certain skilled visas will have to pay a levy to help pay for a new Skilling Australians Fund from March 2018.
Businesses with turnover of less than $10m per year will make an upfront payment of $1,200 per visa per year for each employee on a Temporary Skill Shortage visa and a one-off payment of $3,000 for each employee being sponsored for a permanent Employer Nomination Scheme or a permanent Regional Sponsored Migration Scheme visa.
Businesses with turnover of $10m or more per year will have to make an upfront payment of $1,800 per visa per year for each employee on a Temporary Skill Shortage visa and a one-off payment of $5,000 for each employee being sponsored for a permanent Employer Nomination Scheme or a permanent Regional Sponsored Migration Scheme visa.
The levy replaces the current training benchmark financial obligations for employers of workers on Temporary Work (Skilled) visas, which are being abolished, and permanent Employer Nomination Scheme Direct Entry stream visas.
Superannuation - reducing pressure on housing affordability
First home Super Saver Scheme
From 1 July 2017, individuals can make voluntary contributions (ie salary sacrifice, personal tax deductible and non-concessional contributions) of up to $15,000 per year and $30,000 in total, to their superannuation account to purchase a first home.
Voluntary contributions under this scheme must be made within existing superannuation caps.
Concessional tax treatment will apply to withdrawals and the ATO will be responsible for ensuring that people purchase their first home after they withdraw from superannuation for their deposit.
Contributing the proceeds of property downsizing to super
From 1 July 2018, people aged 65 and over will be able to make a non-concessional contribution into their superannuation of up to $300,000 from the proceeds of selling their home, irrespective of their age, work status, and total superannuation balance.
Both members of a couple will be able to take advantage of this measure for the same home.
Several other measures aimed at reducing pressure on housing affordability are
proposed, including managed investment trusts, an annual charge on foreign owners of underused residential property and restricting foreign ownership in new residential developments.
The Temporary Budget Repair levy will expire on 30 June 2017, otherwise marginal tax rates are unchanged.
Increase to Medicare levy
The Medicare levy is proposed to increase from 2% to 2.5% from 1 July 2019. The increase will be used to assist the funding of the National Disability Insurance Scheme (NDIS).
Other tax rates that are linked to the top marginal tax rate (ie 47.5% following the increase) will also rise, such as the fringe benefits tax rate and the rate applied to employment termination payments in excess of the ETP cap (currently $195,000).
The Medicare levy thresholds for low-income singles, families, and seniors and pensioners will increase in the 2016-17 income year. The increases are based on movements in the consumer price index so that low income earners are generally not liable for the Medicare levy.
The threshold for singles will increase to $21,655. The family threshold will increase to $36,541 plus $3,356 for each dependent child or student.
For senior singles and pensioners the threshold will increase to $34,244. The family threshold for seniors and pensioners will increase to $47,670 plus $3,356 for each dependent child or student.