Business, particularly small business, was a winner of sorts in the 2015 Federal Budget.
Within the context of the current political, economic and fiscal environment this budget is unremarkable and safe. It has placed the growth prospects for the economy on to the shoulders of small business. The sector is the beneficiary of tax cuts, concessions and stimulus for new activity.
There is little to encourage or stimulate the balance of the business community. Without active budgetary policy, the balance of the economy will continue to rely on low interest rates, a lower exchange rate to support exporting and stable pricing. The missing link for business will continue to be consumer confidence.
Here is a summary of key measures relating to business. For more detail on each of the measures visit the Pitcher website or contact our expert staff in our offices in Newcastle, Maitland and Singleton.
- Economic Outlook
The Budget forecasts a 2015/16 deficit of $35.1b, an improvement of $6b from this year’s estimated position. Importantly this represents 2.1% of GDP, a reduced burden of approximately 20% from the prior year.
- Small business (business with turnover below $2m)
Tax cuts for small business
A cut in the small business company tax rate to 28.5 percent from 30 percent, effective from the 2015/2016 income year and thereafter. (Franking credits on distributions for small business will remain at 30 percent). Individuals with assessable income from an unincorporated businesses (eg sole trader) will receive a 5 percent tax discount in the form of a tax credit capped at $1,000.
Upfront asset deductions for small business and farmers
Small business will be able to claim an immediate deduction for each asset with a cost of less than $20,000 which is acquired from today until 30 June 2017. From 1 July 2016, all primary producers will be entitled to an immediate deduction for capital expenditure on fencing and water facilities, such as dams, tanks, pumps and water towers. Fodder storage assets will be depreciated over three years.
Upfront deductions and assistance for start ups
New start-up businesses can immediately deduct start-up costs such as professional, legal and accounting services from the 2015/2016 income year. Currently, some professional costs associated with a new start-up business are capitalised and deducted over a five year period (as “black-hole expenditure”).
Improvements to the ATO to reduce red tape
$130m over a four year period to deliver an improved experience for clients dealing with the ATO.
Capital Gains Tax (CGT) roll-over relief for small business restructures
CGT roll-over relief will be available for restructures that occur from 1 July 2016.
A new regulatory regime for Crowd Sourced Equity Funding
A commitment of $7.8m over four years from 2015-16, to implement and monitor a regulatory framework to facilitate the use of Crowd Sourced Equity Funding.
- Personal tax
Tax rates and work expenses
There was no announcement to change the current personal income tax rates, nor to extend the two percent Budget Deficit Levy for high income earners beyond 30 June 2017. Methods of claiming work-related car expenses are proposed to change from 1 July 2015.
There were no significant superannuation changes announced, which was a relief but not surprising given superannuation taxation is currently being reviewed as part of the Government’s Tax White Paper process.
Netflix Tax to commence from 1 July 2017
The so-called ‘Netflix Tax’ was formally announced in the Budget but will not commence until 1 July 2017. It is being promoted by the Government as an integrity measure and follows the explosive growth in cross-border supplies of digital products since GST came into effect almost 15 years ago.
ATO gets a further $265M for its GST compliance program
An additional $265.5m to the ATO over three years from 2016-17 for its GST compliance activities.
GST-free exemptions are here to stay
In December 2013 the Government announced its intention to remove the GST-free exemptions for supplies of a going concern and supplies of farm land, and to turn them into taxable supplies subject to an optional GST reverse charge mechanism.
Small business work related devices
From 1 April 2016, the Fringe Benefits Tax (FBT) exemption relating to work-related portable electronic devices will be extended to allow small business employers with an aggregated turnover of less than $2m to provide more than one substantially similar work-related portable electronic device annually to each employee (e.g. a tablet and a phablet).
From 1 April 2016, not for profit organisations offering salary packaging options to employees for meal entertainment and entertainment facility leasing expenses will be subject to additional capping measures and reporting measures.
Employee Share Scheme amendments
Three further technical changes will make employee share schemes more accessible for Australian businesses and their employees particularly for start-up companies.
Temporary working holiday makers
Effective 1 July 2016, temporary working holiday makers will be taxable at the non-resident income tax rate of 32.5 percent, regardless of whether they meet other residency tests.
Proposed multinational anti-avoidance rules announced
Australia’s general anti-avoidance income tax provisions will be enhanced to target foreign multinationals supplying goods or services to Australians “artificially” avoiding creating a permanent establishment in Australia so as to avoid paying their “fair share” of tax.