The Federal Budget for 2016/17 was handed down by the Treasurer, Mr Scott Morrison, at 7.30 pm (AEST) on 3 May 2016.
The key tax and superannuation highlights from the Budget are summarised below. A detailed Chartered Accountants summary can be found at the link above.
- The threshold at which the 37% marginal tax rate for individuals commences will increase from taxable incomes of $80,000 to $87,000 from 1 July 2016.
- The low-income thresholds for the Medicare levy and surcharge will increase from the 2015/16 income year.
- The pause in the indexation of the income thresholds for the Medicare levy surcharge and the private health insurance rebate will continue for a further three years from 1 July 2018.
- Income tax exemptions will be provided for ADF personnel deployed in Afghanistan, the Middle East and in international waters.
- Six organisations have been added to the list of specifically-listed deductible gift recipients.
- The small business entity turnover threshold will be increased from $2m to $10m from 1 July 2016 for the purposes of accessing certain existing income tax concessions. The increased threshold will not apply for the purposes of accessing existing small business capital gains tax concessions.
- The unincorporated small business tax discount will be increased in phases over 10 years from the current 5% to 16% as follows:
- 8% from 1 July 2016 to 30 June 2024;
- 10% 30 June 2025;
- 13% 30 June 2026 and
- 16% 30 June 2027 and onwards.
The current cap of $1,000 per individual for each income year will be retained.
- GST reporting requirements for small businesses (with turnover less than $10 Million) will be simplified from 1 July 2017.
- Company tax rate to decrease to 27.5% from 1 July 2016 for incorporated businesses with turnover of less than $10m. This rate will progressively apply to all companies by 1 July 2023 based on turnover as follows:
- $25 million – 1 July 2017;
- $50 million – 1 July 2018;
- $100 million – 1 July 2019;
- $250 million – 1 July 2020;
- $500 million – 1 July 2021;
- $1 Billion – 1 July 2022;
- All Companies – 1 July 2023.
- The company tax rate will then reduce as follows:
- 27% from 1 July 2024;
- 26% from 1 July 2025;
- 25% from 1 July 2026 onwards.
- Targeted amendments will be made to improve the operation and administration of integrity rules for closely-held, private groups (in Div. 7A of the Income Tax Assessment Act 1936) from 1 July 2018.
- The Government has amended the Mid-Year Economic and Fiscal Outlook 2015-16 measure National Innovation and Science Agenda — tax incentives for angel investors to:
- reduce the holding period from three years to 12 months for investors to access the 10 year capital gains tax exemption;
- include in the definition of eligible start-ups, a time limit on incorporation and criteria for determining if the start-up is an innovation company;
- require that the investor and innovation company are non-affiliates; and
- limit the investment amount for non-sophisticated investors to $50,000 or less per income year in order to receive a tax offset.
- The Government has amended the Mid-Year Economic and Fiscal Outlook 2015-16 measure National Innovation and Science Agenda — new arrangement for venture capital investment to:
- add a transitional arrangement that allows conditionally registered funds that become unconditionally registered after 7 December 2015 to access the tax offset if the criteria are met;
- relax the requirement for very small entities to provide an auditors’ statement of assets;
- extend the increase in fund size from $100.0 million to $200.0 million for new early-stage venture capital limited partnerships (ESVCLPs) to also apply to existing ESVCLPs; and
- ensure that the venture capital tax concessions are available for FinTech, banking and insurance related activities.
- The commencement date for the proposed measure addressing the double counting of deductible liabilities under the tax consolidation regime announced in the 2013/14 Federal Budget will deferred from 14 May 2013 to 1 July 2016.
- The treatment of deferred tax liabilities under the tax consolidation regime will be amended and apply to transactions that commence after the date the legislation is introduced into parliament.
- The taxation of financial arrangements (TOFA) rules will be reformed and new simplified rules will apply from 1 January 2018 to reduce the scope of the rules and decrease compliance costs.
- The threshold at which high income earners pay additional contributions tax will be lowered to $250,000 from 1 July 2017. The annual cap on concessional superannuation contributions will also be reduced to $25,000.
- The tax exemption on earnings of assets supporting Transition to Retirement Income Streams will be removed from 1 July 2017.
- A lifetime non-concessional contributions cap of $500,000 will be introduced. It will take into account all non-concessional contributions made on or after 1 July 2007 and will apply from 7.30pm on 3 May 2016. Contributions made before the commencement will not result in an excess.
- The current restrictions on people aged 65 to 74 making superannuation contributions for their retirement will be removed from 1 July 2017.
- From 1 July 2017 Individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years.
- From 1 July 2017 all individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions.
- The income spouse tax offset threshold will be increased to $37,000 from 1 July 2017.
- A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners from 1 July 2017.
- The income threshold for the receiving spouse (whether married or de facto) of the low income spouse tax offset will be increased to $37,000 from 1 July 2017.
- A balance cap of $1.6m on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase will be introduced from 1 July 2017. Members already in the retirement phase with balances above $1.6m will be required to reduce their retirement balance to $1.6m by 1 July 2017.
- The anti-detriment provision in respect of death benefits from superannuation will be removed from 1 July 2017.
- A “Diverted Profits Tax” will be introduced which will impose a 40% penalty tax on multinational companies that attempt to shift their Australian profits offshore to avoid paying tax. This is in addition to the Multinational Anti Avoidance Law (MAAL) put in place last year.
- The transfer pricing rules will be strengthened to reduce opportunity for companies to avoid paying tax on business activity in Australia by shifting profits offshore these include:
- Amendments to give effect to OECD recommendations, effective from 1 July 2016.
- Implementation of rules developed by the OECD to eliminate hybrid mismatch arrangements effective from 1 January 2018; and
- Administrative penalties imposed on significant global entities will be increased from 1 July 2017.
GST and Other Indirect Taxes
- The GST will be extended to low value goods imported by consumers from 1 July 2017. Overseas suppliers that have an Australian turnover of $75,000 or more will be required to register for, collect and remit GST for low value goods supplied to consumers in Australia, using a vendor registration model.
- Tobacco excise and excise-equivalent customs duties will be subject to four annual increases of 12.5% from 1 September 2017.
- The wine equalisation tax (WET) rebate cap will be reduced to $350,000 on 1 July 2017 and to $290,000 on 1 July 2018.
- A newly established Tax Avoidance Taskforce will be set up to provide the ATO with greater firepower to crack down on tax avoidance by businesses, multinationals and high wealth individuals.
- The Government will also strengthen the protections for whistle-blowers who come forward and report tax avoidance, introduce laws to require tax advisers and promoters of tax schemes to disclose reportable tax schemes to the ATO
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