Budget-2016Budget 2016 Update

In our last newsletter we discussed some of the proposed changes to superannuation handed down in the Federal Budget 2016. There were also some other announcements affecting small business and personal tax payers.

In particular we like:

  • the company tax rate will be reduced from 30% to 27.5% for companies with an annual aggregated turnover of less than $10 million with effect from 1 July 2016. The corporate tax rate is currently 28.5 per cent for small business entities (broadly, those with annual aggregated turnover of less than $2 million) and 30 per cent for all other companies. The threshold will then be progressively increased to ultimately have all companies at 27.5 per cent in the 2023- 24 income year,
  • the small business entity turnover threshold will be increased from $2 million to $10 million from 1 July 2016. Importantly, all business entities (incorporated or otherwise) that meet the new $10 million aggregated turnover test will be able to access the simplified depreciation rules, including the existing instant asset write-off scheme. This will allow them to claim an immediate deduction for depreciable asset purchases costing less than $20,000 (excluding gst) until 30 June 2017,
  • this increase in turnover threshold will also apply to the option to account for Goods and Services Tax (GST) on a cash basis (currently $2M) rather than an accruals basis,
  • the increase in turnover threshold will also apply to restructuring in certain circumstances, allowing small businesses to restructure (i.e. transfer some or all of its assets to another entity) and be able to access capital gains tax relief,
  • increase in the marginal tax bracket for individuals from $80,000 to $87,000 from 1 July 2016, extending the marginal tax rate of 32.5% up to $87,000. The marginal tax rate for income over $87,000 but < $180,000 is 37%, excluding the medicare levy of 2%.