Budget 2016 for small business

Federal Budget 2016 – changes affecting small business, tax, super

The May 2016 Federal Budget announcement has delivered changes that will affect many people of all ages and stages in life. Some changes affect small business owners, and changes to taxation and superannuation (which includes SMSF members) will affect almost everyone. It’s not all bad news, of course! The changes for business owners and wage-earners are generally being received as favourable. Here we summarise the major changes, in easy point form. As always, we’re here to discuss the finer details and implications with you.

Small business

  • The small business entity turnover threshold will be increased from $2m to $10m from 1 July 2016 and will allow more businesses to access certain concessions including:
    • Smaller corporate tax rate (27.5% in 2017 FY)
    • Simplified depreciation rules, including the instant asset write-off for assets under $20k
    • Simplified trading stock rules
    • Option to account for GST on a cash basis
  • This turnover threshold will not apply to accessing the CGT small business concessions, with the turnover threshold remaining at $2m.
  • The unincorporated small business tax discount will be increased from 5% in 2016 FY to 8% in 2017 FY. The turnover for such businesses must be less than $5m. The cap of $1,000 per individual for each income year is retained.
  • Simplified GST reporting requirements for small businesses.
  • A reduction in the corporate tax rate to 25% over 10 years and an increase in the threshold for all companies overtime.

Taxation

  • Tax incentives for early stage investors including a 20% tax offset and a capital gains tax exemption.
  • The 37% marginal tax rate threshold has been increased from $80k to $87k from 1 July 2016.
  • The Medicare levy and surcharge low income thresholds to increase.

Superannuation

  • The Division 293 contributions tax threshold has been reduced from $300k to $250k from 1 July 2017. This is the point at which 30% is paid on concessional contributions instead of 15%.
  • Concessional contribution will be capped at $25,000 for everyone from 1 July 2017.
  • The tax exemption on earning of assets supporting Transition-to- retirement Income Streams will be removed from 1 July 2017. These are the superannuation pensions paid to members who are over preservation age but are not retired.
  • A lifetime cap of $500k for non-concessional contributions has been introduced and will apply from budget night. It will include all non-concessional contributions made since 1 July 2007. This replaces the existing $180k annual cap. Contributions made before budget night cannot result in an excess.
  • The work test and spouse limits for those aged under 75 years have been removed from 1 July 2017.
  • Individuals can make catch up concessional contributions where their super balance is less than $500k and where they have not reached their concessional cap in previous years. This will start from 1 July 2017.
  • All employees can deduct personal superannuation contributions from 1 July 2017.
  • A low income superannuation tax offset is to be introduced from 1 July 2017 for super funds based on the tax paid on concessional contributions made on behalf of low income earners up to a cap of $500.
  • A cap of $1.6m has been introduced to the amount that can be transferred to an account based pension from 1 July 2017. Subsequent earnings on these balances will not be restricted. Where an individual has more than $1.6m in their fund this will be maintained in an accumulation phase account and taxed at 15%.

Other

  • GST to apply to low-value goods imported by consumer from 1 July 2017.
  • Wine equalisation tax rebate cap will be reduced from $500k to $350k on 1 July 2017 and to $280k on 1 July 2018.