1. law, govt and politics
2. government

The “dull and boring” Budget? Not for small business!
Small business is one of the clear winners from the 2015­16 Federal Budget delivered by the Treasurer, Mr Joe Hockey last night. Many key Budget announcements that comprised the Government’s small business package were announced (or “leaked!”) pre­Budget and confirmed
in the Budget papers. These include:
a reduction in the company tax rate to 28.5% for small companies
a temporary immediate write­off for capital assets acquired by small businesses
an immediate deduction for professional expenses associated with starting a new business; and
CGT roll­over relief for changes to an entity structure.
Despite the lead­up mantra that the Budget was going to be “dull and boring”, there were nevertheless a few surprises contained in the pages of the
Budget papers that were devoted to small business:
Whilst the 1.5% tax cut for small companies has been long expected, last night the Government unexpectedly announced that the current
maximum 30% franking credit would still be available to those companies’ shareholders. This should allay the fears of the small business
community that the tax cut would merely have resulted in “mum and dad” shareholders of family companies paying the extra 1.5% in top­up tax.
The 5% discount on the tax liability of unincorporated small business entities was largely unanticipated. This caters for the vast majority of small
businesses that are not companies. The Budget papers were silent as to whether an individual who receives income from a trading trust is entitled
to this discount. The devil will be in the detail once draft legislation is released.
The $20,000 threshold for the immediate write­off of capital assets is much higher than the $10,000 cap that has been widely speculated in recent
weeks. The timing benefit however only applies until 30 June 2017.
These small business measures, whilst generous in principle, only tinker at the edges of the small business tax regime. The Government is currently still
in consultation stage for its Tax White Paper, of which small business taxation is a significant part. The structural reform to the tax system that the
Australian community yearns for is unfortunately still some time away. Nevertheless, the Budget measures will most certainly be welcomed by small
businesses around Australia for the relief that they offer (even if the relief is slight or temporary).
As anticipated, the Budget contained a proposal for a so­called “Netflix tax” (ie. extending the GST to digital products and services imported by
consumers in Australia). However, another rumoured GST change, to decrease the GST exemption threshold of $1,000 that applies to purchases of
imported goods, did not make an appearance in the Budget papers.
The Treasurer’s touted “Google tax” was also a notable absentee. In its place, the Government plans to implement an anti­avoidance rule specifically
directed towards very large multinationals. Other anti­avoidance announcements aimed at the same taxpayers illustrate the Government’s much­
discussed intentions to “combat multinational tax avoidance”.
As promised, there were no new changes for superannuation and some adjustments for pension entitlement tests. There were few other notable
Budget impacts for personal taxation. The Budget announcement which will have the most significant impact on middle Australia is the child care reform
package.
Overall, while not completely “dull and boring”, this Budget is less polarising than last year’s. From the Federal Budget Team
Taxpayers Australia Ltd.
Back to the top
Key measures at a glance
Individuals and families
Individuals
Personal tax rates
Personal tax rates will not change and the 2% Temporary Budget Deficit Levy for taxable incomes over $180,000 will not be extended. The levy will, as
expected, cease at the end of the 2016­17 income year.
Work related car expenses
The Government announced its intention to change the methods of calculating work‑related car expense deductions from the 2015‑16 income year.
The '12% of original value method' and the 'one‑third of actual expenses method', which are used by less than 2% of those who claim work‑related car
expenses, will be removed.
The 'cents per kilometre method' will be modernised by replacing the three current rates based on engine size with one rate set at 66 cents per
kilometre to apply for all motor vehicles, with the Commissioner of Taxation (Commissioner) responsible for updating the rate in following years.
The 'logbook method' of calculating expenses will be retained. These changes will not affect leasing and salary sacrifice arrangements.
According to the Government, these changes will better align car expense deductions with the average costs of operating a motor vehicle.
Medicare levy thresholds
The Government will increase the Medicare levy low­income thresholds for singles, families and single seniors and pensioners from the 2014‑15
income year, to take account of movements in the Consumer Price Index so that low‑income taxpayers generally continue to be exempted from paying
the Medicare levy.
Specifically:
For singles, the threshold will be increased to $20,896.
For couples with no children, the threshold will be increased to $35,261 and the additional amount of threshold for each dependent child or
student will be increased to $3,238.
For single seniors and pensioners, the threshold will be increased to $33,044.
Higher Education Loan Programme (HELP) – recovery from overseas debtors
The Government will extend the HELP repayment framework to debtors residing overseas.
From 2016­17, HELP debtors residing overseas for six months or more will be required to make repayments of their HELP debt if their worldwide
income exceeds the minimum repayment threshold at the same repayment rates as debtors in Australia.
Zone Tax Offset to exclude ‘fly­in fly­out’ and ‘drive­in drive­out’ workers
The Government will exclude ‘fly­in fly­out’ and ‘drive­in drive­out’ (FIFO) workers from the Zone Tax Offset (ZTO) where their normal residence is not
within a ‘zone’.
This measure will take effect from 1 July 2015.
The ZTO is a concessional tax offset available to individuals in recognition of the isolation, uncongenial climate and high cost of living associated with
living in identified locations. Eligibility is based on defined geographic zones.
Currently, to be eligible for the ZTO, a taxpayer must reside or work in a specified remote area for more than 183 days in an income year. According to
the Government, it is estimated that around 20% of all claimants do not actually live full­time in the zones. Many of these are FIFO workers who do not
face the same challenges of remote living that the ZTO was designed to address.
Those FIFO workers whose normal residence is in one zone, but who work in a different zone, will retain the ZTO entitlement associated with their
normal place of residence.
Removing the income tax exemption for government employees working overseas
The Government will remove an income tax exemption that is currently available to government employees who earn income while delivering Official
Development Assistance (ODA) overseas for more than 90 continuous days.
This measure will take effect from 1 July 2016.
According to the Government, this measure will remove the inconsistent taxation of government employees delivering ODA overseas by ensuring that
their foreign earnings are treated as assessable income in Australia.
Australian Defence Force and Australian Federal Police personnel and individuals delivering ODA for a charity or private sector contracting firm will
maintain eligibility for the exemption.
Families
Child care measures
The Government announced a child care package, which includes the following measures:
i. New Child Care Subsidy
A new single Child Care Subsidy (CCS) will be introduced from 1 July 2017 for changes to the existing child care payments.
The CCS will replace the current child care fee assistance provided by the Child Care Benefit, Child Care Rebate and the Jobs, Education and Training
Child Care Fee Assistance payments which will cease on 30 June 2017.
Specifically, under the CCS:
Families meeting the activity test with annual incomes up to $60,000 (2013­14 dollars) will be eligible for a subsidy of 85% of the actual fee paid,
up to an hourly fee cap.
The subsidy will taper to 50% for eligible families with annual incomes of $165,000.
The CCS will have no annual cap for families with annual incomes below $180,000. For families with annual incomes of $180,000 and above, the
CCS will be capped at $10,000 per child per year.
The income threshold for the maximum subsidy will be indexed by the CPI with other income thresholds aligned accordingly.
Eligibility will be linked to a new activity test to better align receipt of the subsidy with hours of work, study or other recognised activities.
The hourly fee cap in 2017­18 will be set at $11.55 for long day care, $10.70 for family day care, and $10.10 for outside school hours care. The
hourly fee caps will be indexed by CPI.
Note: In 2017­18, the family income thresholds will be $65,710 (maximum subsidy), $170,710 (minimum subsidy) and $185,710 (application of the
annual cap of $10,000). The annual cap will be indexed by CPI from 1 July 2018.
ii. Interim Home Based Carer Subsidy Programme
A new Interim Home Based Carer Subsidy Programme will subsidise care provided by a nanny in a child’s home from 1 January 2016.
The pilot programme will extend fee assistance to the parents of approximately 10,000 children. Families selected to participate will be those who are
having difficulty accessing child care with sufficient flexibility (eg. nurses, shift workers, police, etc).
Support for families will be based on the CCS parameters, but with a fee cap of $7.00 per hour per child.
iii. Child Care Safety Net
The Government will provide additional funding from 2015­16 to provide targeted support to disadvantaged or vulnerable families to address barriers to
accessing child care. The assistance will be provided through the Child Care Safety Net, which consists of three programmes:
Additional Child Care Subsidy
(ACCS)
The ACCS will provide additional assistance to supplement
the Child Care Subsidy for eligible disadvantaged or
vulnerable families
Inclusion Support Programme (ISP)
The new ISP will assist families with children with additional
needs to access child care. The ISP will provide more
funding for services to get the necessary skilled staff and
equipment to support children with special needs.
Community Child Care Fund
(CCCF)
The CCCF will provide grants to child care services to
improve access to child care in disadvantaged
communities, increase the supply of child care places in
areas of high demand and low availability, and improve
affordability for low income families in areas where the
average fees are greater than the CCS fee cap.
iv. No Jab No Pay
The Government will ensure that children fully meet immunisation requirements before their families can access certain Government payments.
From 1 January 2016, families will no longer be eligible for subsidised child care or the Family Tax Benefit (FTB) Part A end­of­year supplement unless
their child is up­to­date with all childhood immunisations.
Exemptions will only apply for medical reasons.
Youth Allowance
The Government will amend parental income testing arrangements to provide more support for families with dependent young people who qualify for
certain income support payments, including Youth Allowance, ABSTUDY Living allowance (ABSTUDY), and the Assistance for Isolated Children
Scheme.
From 1 January
2016
Families with dependent children receiving income support payments
would be subject to the Parental Income Test arrangements currently in
place for FTB Part A and will no longer be subject to the Family Assets
Test or Family Actual Means Test.
Where a family has a dependent child who receives an individual income
support payment and younger siblings who qualify the family to receive
FTB Part A, a single Parental Income Test will be applied taking into
account all income support benefits the family receive.
From 1 January
2017
A Maintenance Income Test will be introduced for dependent children
receiving individual income support payments. This test will apply to that
child only and not include other child support amounts provided in relation
to other children in the family. This will be of particular benefit to rural and
regional families whose children continue to study beyond Year 12.
Family Tax Benefit Part A
The Government will reduce the amount of time FTB Part A will be paid to recipients who are outside Australia.
From 1 January 2016, families will only be able to receive FTB Part A for six weeks in a 12 month period while they are overseas. Currently, FTB Part A
recipients who are overseas are able to receive their usual rate of payment for six weeks and then the base rate for a further 50 weeks.
Portability extension and exception provisions which allow longer portability under special circumstances will continue to apply.
Back to the top
General business
Employee share schemes
In early 2015, the Government released draft legislation to implement changes to the taxation of shares and rights acquired under an employee share
scheme (ESS). Consultations on the draft legislation identified some minor technical changes that could be made to the legislation.
As part of the Federal Budget, the Government announced a measure to address these issues by:
excluding eligible venture capital investments from the aggregated turnover test and grouping rules (for the start­up concession)
providing the CGT discount to ESS interests that are subject to the start­up concession, where options are converted into shares and the resulting
shares are sold within 12 months of exercise, and
allowing the Commissioner to exercise discretion in relation to the minimum three­year holding period where there are circumstances outside the
employee’s control that make it impossible for them to meet this criterion.
There will also be a number of other amendments to the ESS rules.
These changes will take effect with the remainder of the enabling legislation from 1 July 2015.
Research and development tax incentive
The Government intends to introduce a $100 million cap on the amount of eligible research and development (R&D) expenditure for which companies
can claim a tax offset at a concessional rate under the R&D tax incentive. Under the R&D tax incentive, companies with turnover of less than $20 million
can claim a refundable tax offset of 43.5% and other companies can claim a non­refundable tax offset of 38.5%.
Expenditure beyond the $100 million cap will receive a lower offset at the company tax rate.
This measure replaces the measure announced by the previous government in the 2013­14 Federal Budget.
Managed investment trusts
The Government announced its intention to introduce a 12 month transition period in the implementation of a new tax system for managed investment
trusts (MITs). The provision of a transition period is a result of stakeholder feedback that many MITs require additional time to make amendments to
their trust deeds and IT systems.
The new MIT rules will now apply from 1 July 2016. MITs will continue to be allowed to disregard the trust streaming provisions for the 2015­16 income
year. However, MITs can choose to apply the new rules from 1 July 2015.
Streamlining business registration
The Government will provide $32.4 million over five years from 2014‑15 (including capital of $13.5 million over three years from 2014‑15) for the ATO,
Australian Securities and Investments Commission (ASIC) and the Department of Industry and Science, to:
develop a single online portal for business and company registration
publish new computer code to enable developers to build new registration software, and
reduce the number of business identifiers.
Funding for this proposal is contingent on a second pass business case.
Crowd‑sourced equity funding for public companies
The Government will provide $7.8 million over four years from 2015‑16 to ASIC to implement and monitor a regulatory framework to facilitate the use of
crowd‑source equity funding (CSEF), including simplified reporting and disclosure requirements.
According to the Government, CSEF is an emerging form of funding that allows entrepreneurs to raise funds online from a large number of small
investors and has the potential to increase funding options available for entrepreneurs to assist in the development of their business.
The proposed law will also remove the costly elements of transitioning to a public company, enabling proprietors of private companies to more easily
raise funds from a large number of small investors.
Back to the top
Tax administration
Reforms to the ATO
The Government will provide the ATO with $130.9 million over four years (including capital of $35.6 million).
Red tape will be reduced and future administrative savings delivered through investment in three foundational initiatives:
a digital by default service for provision of information and making payments
improvements to data and analytics infrastructure, and
enhancing streamlined income tax returns through the myTax system for taxpayers with more complex tax affairs.
The package of service improvements supports the Government's commitment to reduce red tape and forms part of the Government's digital
transformation agenda.
According to the Government, the costs of this measure will be met from within the existing resourcing of the ATO. The measure has no net impact on
total ATO resourcing over the forward estimates period.
Statutory remedial power for the Commissioner
The Government intends to provide the Commissioner with a statutory remedial power. This power will allow the Commissioner to make a legislative
instrument to modify the operation of the tax law to ensure that the law’s purpose or object is achieved.
The nature and volume of tax law and its evolution has sometimes produced unforeseen or unintended outcomes when applied. The statutory remedial
power will allow the Commissioner to administer the law consistently with its purpose or object, where it has no more than a negligible budget impact
and provided it has a beneficial outcome for affected taxpayers.
A legislative instrument made under the proposed power will be subject to extensive consultations and disallowance by Parliament.
The measure will have effect from the date of Royal Assent of the enabling legislation.
Serious Financial Crime taskforce
The Government announced that it will provide $127.6 million over four years to a Serious Financial Crime taskforce for investigations and
prosecutions that will address superannuation and investment fraud, identity crime and tax evasion.
The aim of the taskforce is to maintain integrity and community confidence in Australian financial markets and regulatory systems.
The taskforce includes eight federal agencies, including the ATO.
Further information can be found in the Treasurer’s media release dated 5 May 2015.
Inspector­General of Taxation – additional funding
The Government will provide $14.6 million over five years to the Inspector‑General of Taxation to support its operations.
This funding is in addition to the 2014‑15 Budget measure entitled Inspector‑General of Taxation — transfer of tax complaints handling.
Increase in value of penalty unit
The value of all Commonwealth penalty units will increase from $170 to $180 from 31 July 2015.
The Government will also introduce ongoing indexation of penalty units based on the CPI. Indexation will occur on 1 July every three years, with the first
indexation occurring on 1 July 2018.
Back to the top
Small business
The Government announced a Growing Jobs and Small Business package to assist small businesses.
Broadly, small businesses with an aggregated annual turnover of less than $2 million will be eligible for the following concessions:
Tax cuts for small business companies and unincorporated entities
The Government will deliver a tax cut to all small businesses through:
a 1.5% tax cut for small companies, and
a 5% discount on tax payable on income from unincorporated small business activity.
According to the Government, this measure will deliver lower taxes to both incorporated and unincorporated small businesses, improving their cash flow
and assisting them to grow, compete and hire new workers.
These tax cuts will be available from the 2015‑16 income year.
(i) 28.5% tax rate for ‘small’ companies
The Government will reduce the company tax rate from 30% to 28.5% for small companies with an aggregated annual turnover of less than $2 million.
Companies with an aggregated annual turnover of $2 million or above will continue to be subject to the current 30% rate on all their taxable income.
Importantly, the current maximum franking credit rate for a distribution will remain unchanged at 30% for all companies, maintaining the existing
arrangements for investors, such as self‑funded retirees.
(ii) 5% discount on tax payable by unincorporated ‘small’ businesses
Individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be
eligible for a small business tax discount.
The discount will be 5% of the income tax payable on the business income received from an unincorporated small business entity.
The discount will be capped at $1,000 per individual for each income year, and delivered as a tax offset.
Temporary accelerated depreciation for small business assets costing less than $20,000
The Government will significantly expand accelerated depreciation for small businesses by allowing small businesses with aggregate annual turnover of
less than $2 million to immediately deduct assets they start to use or install ready for use, provided the asset costs less than $20,000.
This measure will apply for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June 2017.
The Government also announced that it will suspend the current 'lock out' laws for the simplified depreciation rules until 30 June 2017. The ‘lock out’
rules prevent small businesses from re‑entering the simplified depreciation regime for five years if they opt out.
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed in the small business simplified depreciation pool
(the 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 2017, the thresholds for the immediate depreciation of assets and the value of the pool will revert back to existing arrangements.
Immediate deduction for professional expenses
The Government will allow businesses to immediately deduct a range of professional expenses associated with starting a new business, such as
professional, legal and accounting advice.
Currently, some professional costs associated with a new business start­up are deducted over a five year period.
This measure will apply from the 2015‑16 income year.
CGT roll‑over relief for changes to entity structure
The Government will allow small businesses with an aggregated annual turnover of less than $2 million to change legal structure without attracting a
CGT liability at that point.
This measure will apply from the 2016‑17 income year.
CGT roll‑over relief is currently available for individuals who incorporate but all other entity type changes have the potential to trigger a CGT liability.
This measure recognises that new small businesses might choose an initial legal structure that they later find does not suit them when the business is
more established.
FBT changes for work‑related electronic devices
The Government will allow a FBT exemption from 1 April 2016 for small businesses with an aggregated annual turnover of less than $2 million that
provide employees with more than one qualifying work‑related portable electronic device, even where the items have substantially similar functions.
Currently, an FBT exemption can apply to more than one portable electronic device used primarily for work purposes, but only where the devices
perform substantially different functions.
According to the Government, the proposed change will remove confusion where there is a function overlap between different products (such as
between a tablet and a laptop).
Back to the top
Goods and services tax
GST on imported digital products and services
The Government intends to extend the application of the GST to cross border supplies of digital products and services imported by Australian
consumers (such as a Netflix Australia subscription).
Under the current GST law, these imports are not subject to the GST. According to the Government, this places domestic businesses, which generally
have to remit GST on the digital products and services they provide, at a tax disadvantage compared to foreign businesses.
This measure will result in Australia being an early adopter of guidelines for business­to­consumer supplies of digital products and services being
developed by the OECD as part of the OECD/G20 base erosion and profit shifting project.
The proposed measure will apply from 1 July 2017.
On Budget night, the Government released draft legislation, the Tax Laws Amendment (Tax Integrity: GST And Digital Products) Bill 2015.
Note: This change will require the unanimous agreement of the States and Territories prior to the enactment of legislation.
Three year extension to GST compliance program
The Government will provide $265.5 million to the ATO over three years from 2016­17 to continue a range of activities to promote GST compliance.
Arrangements for funding these activities will be settled with the States and Territories.
Not proceeding with a reverse charge for going concerns and farmland
The Government announced that it will not proceed with the previously announced but unenacted measure to replace the current GST­free treatment
for supplies of going concerns and farmland with a reverse charge mechanism.
The original measure was intended to reduce the compliance burden for taxpayers. However, during design of the implementation of the measure, it
became apparent that proceeding with the measure would have resulted in adverse consequences for taxpayers.
Back to the top
Fringe benefits tax
Cap for salary sacrificed meal entertainment and entertainment facility leasing expenses
The Government will introduce a separate single grossed‑up cap of $5,000 for salary sacrificed meal entertainment and entertainment facility leasing
expenses (meal entertainment benefits) for employees. Meal entertainment benefits exceeding the separate grossed‑up cap of $5,000 can also be
counted in calculating whether an employee exceeds their existing FBT exemption or rebate cap. All use of meal entertainment benefits will become
reportable.
Currently, employees of public benevolent institutions and health promotion charities have a standard $30,000 FBT exemption cap (this will be $31,177
for the first year of the measure, due to the Temporary Budget Repair Levy) and employees of public and not‑for‑profit hospitals and public ambulance
services have a standard $17,000 FBT exemption cap (this will be $17,667 for the first year).
In addition to these FBT exemptions, these employees can salary sacrifice meal entertainment benefits with no FBT payable by the employer and
without it being reported. Employees of rebatable not‑for‑profit organisations can also salary sacrifice meal entertainment benefits, but the employers
only receive a partial FBT rebate, up to a standard $30,000 cap ($31,177 for the first year).
This measure will apply from 1 April 2016.
Back to the top
Superannuation
In the 2015­16 Federal Budget, the Government reiterated that it will not introduce any new superannuation taxes during this term of government.
Accordingly, no new superannuation measures were announced, including any changes to the limited recourse borrowing arrangements.
The Budget does include certain marginal measures that were previously advised: Early super access for terminal illness: For those with a terminal medical condition, from 1 July 2015 the life expectancy period for full access
to superannuation benefits to be extended from 12 to 24 months.
Defined benefit super schemes: Commencing 1 January 2016 a 10% cap will be applied to the deductible amount of defined benefit income
streams for the social security income test.
Supervisory levies: These will be increased to allow full cost recovery from 2015­16.
Lost and unclaimed superannuation: The reporting obligations will be streamlined from 1 July 2016.
Pensions
In the Budget, the Government confirmed a number of measures affecting pensions which were previously announced by the Minister for Social
Services in a media release dated 7 May 2015.
(i) Rebalance asset test thresholds and taper rate
The Government intends to increase the asset test thresholds and the withdrawal rate at which pensions are reduced once the threshold is exceeded.
Asset test thresholds
The assets test threshold (‘assets free area’) will be increased:
for single home owners – from $202,000 to $250,000, and
for couple home owners – from $286,000 to $375,000.
Pensioners who do not own their own home will also see an increase in their threshold to $200,000 more than homeowner pensioners:
for single non­home owners: $450,000, and
for couple non­home owners: $575,000
The Government will also reduce the maximum value of assets that can be held to qualify for a part pension.
For couples, this is currently up to $1,151,500 plus the family home. Under the proposed changes, this threshold will decrease to $823,000 plus the
family home.
Pensioners who lose pension entitlement on 1 January 2017 as a result of these changes will automatically be issued with a Commonwealth Seniors
Health Card or a Health Care Card for those under Age Pension age.
Taper rates
The proposal will reverse changes to the ‘taper rates’ introduced in 2007. From 1993 to 2007 a $3 taper rate was in place where for every additional
$1,000 in assets above the minimum threshold for a full pension, fortnightly payments were reduced by $3. In 2007, this was changed to a $1.50 taper
rate.
Taxpayers impacted by these changes will be able to maintain their current level of income by drawing down less than 1.84% on their additional assets
($574,000 for a single homeowner), in a worst case scenario.
These measures will apply from 1 January 2017.
(ii) Improve integrity of social security income test arrangements
The Government will improve fairness and equity in social security payments by ensuring that a larger proportion of a superannuant's actual defined
benefit income is taken into account when applying the relevant social security income test.
Under this measure, the proportion of income that can be excluded from any income test (the deductible amount) will be capped at 10% from 1 January
2016.
Under current arrangements, some defined benefit superannuants are able to have a large proportion of their superannuation income excluded from
the pension income test.
Recipients of Veterans' Affairs pensions and/or defined benefit income streams paid by military superannuation funds are exempt from this measure.
(iii) Not proceeding with elements of the measure to maintain eligibility thresholds for Australian Government payments for
three years
The Government will not proceed with elements of the 2014‑15 Budget measure Maintain eligibility thresholds for Australian Government payments for
three years that relate to the pension income test free areas and deeming thresholds.
The pension income test free areas and deeming thresholds will continue to be indexed annually by the Consumer Price Index. Major pension related
payments include the Age Pension, Carer Payment, Disability Support Pension, and the Veterans' Service Pension.
(iv) Pension indexation to CPI will not proceed
The Government announced that it will not proceed with the 2014­15 Budget measure to constrain increases in the pension to the Consumer Price
Index.
Pension and pension equivalent payment rates will continue to be indexed under current arrangements — by the higher of the increases in the CPI or
the Pensioner and Beneficiary Living Cost Index and benchmarked against Male Total Average Weekly Earnings. Back to the top
International tax
Tax residency rules for temporary working holiday makers
The Government intends to change the tax residency rules so that most people who are temporarily in Australia for a working holiday as non­resident
for tax purposes, regardless of how long they are in Australia. As a result, affected taxpayers will be taxed at 32.5% from their first dollar of taxable
income.
Under the current tax residency rules, a working holiday maker can be treated as a resident for tax purposes if they satisfy the residency tests; typically,
that they are in Australia for more than six months. This means that currently these taxpayers are able to access resident tax treatment, including the
tax­free threshold of $18,200, the low income tax offset and the lower marginal tax rate of 19% for taxable incomes between $18,201 and $37,000.
The measure will apply from 1 July 2016.
Combatting multinational tax avoidance
The Government announced several measures intended to address multinational tax avoidance.
These measures will only apply to companies with global revenue of at least $1 billion.
(i) A targeted anti­avoidance measure
The Government announced its intention to introduce a targeted anti­avoidance law in the general anti­avoidance rule (Part IVA of the Income Tax
Assessment Act 1936) aimed at multinationals that ‘artificially avoid having a taxable presence of Australia’.
The proposed law will apply to tax benefits obtained from 1 January 2016.
The Government also released the amending legislation, the Tax Laws Amendment (Tax Integrity: Multinational Anti­Avoidance Law) Bill 2015, on
Budget night.
(ii) New transfer pricing documentation standards
The Government will implement the Organisation for Economic Co­operation and Development’s new transfer pricing documentation standards from 1
January 2016. Under the new documentation standards, the ATO will receive specified information on large companies that operate in Australia.
(iii) Stronger penalties
The Government intends to double the maximum administrative penalties that can be applied by the Commissioner of Taxation to large companies that
enter into tax avoidance and profit shifting schemes. This measure will apply for the 2015­16 and later income years.
Penalties will not change for taxpayers with a ‘reasonably arguable’ tax position.
(iv) Strengthening Australia’s foreign investment framework
The Government announced that it will strengthen Australia’s foreign investment framework through a number of initiatives across various areas of
government.
Relevant to taxation and treasury, the Government will provide $19.7 million over four years to the Department of the Treasury and $47.5 million to the
ATO to improve compliance and strengthen the enforcement of Australia’s foreign investment framework.
In addition, the Government will establish a Treasury office in Sydney to enable the Treasury to engage with the private sector more effectively on a
range of issues.
Back to the top
1405 Burke Road
Kew East Victoria 3102
Tel: (03) 8851 4555
Fax: (03) 8851 4588
ABN: 96 075 950 284
Reg No: A0033789T
Membership
Tax Training
Products & Resources
News & Media
About Us
Become a Member
Benefits of Membership
Taxpayers Australia
Superannuation Membership
My Account
TAI Practitioners & Advisers Ltd
Seminars
Webinars
Discussion Group
Webinar Recordings
Seminar Notes & Recordings
Perth Tax Updates
Small Business Resources
Individuals Resources
Client Newsletter
Client Newsletter Premium
Monthly Tax Update
Tax Summary
The Taxpayer Journal
Lodgement Rates & Thresholds
Guide
Tax Wrap Podcast
DIY Superannuation Manual
Superannuation Journals
Tax Policy Journals
Publications
Media Releases
Media Interviews
News Centre
Submissions ­ATO & Treasury
Submissions ­ Other
The Taxpayer Editorials
Superannuation Editorials
e­News Subscription
e­News Archive
Federal budget winners and losers
Tuesday, 12 May 2015 by Nathan Hewitt
The dust is still settling around this year's budget, but there
are some big winners and losers starting to emerge. Among
the winners are small businesses and our national security
measures; the biggest losers, so far, are the states and the
so­called maternity leave "double­dippers". Check out where
the government's pieces have fallen below:
Winners Small business
The small business tax rate will be lowered by 1.5% to 28.5%, which signficantly eases the
burden for business owners.
It's even better for smaller, unincorporated businesses. Sole traders, partnerships, trusts and the
like will get a 5% tax discount.
All small businesses get an immediate write off of all individual assets up to $20,000, starting
from budget night.
New companies will be able to write off start­up expenses straightaway.
National Security
The government will set aside $450 million dollars to fund resources for intelligence agencies. Of
that amount, $296 million will boost the tech of the country's intelligence­gathering agencies.
The telecommunications industry will get $131 million to help it prepare for metadata collections
laws.
$22 million will be invested into social media monitoring for counter­terrorism.
Country Australia
Farmers dealing with drought conditions will get a piece of $250 million set aside to keep the
Drought Concessional Loan Scheme going for another year.
Fences and water storage facilities will be available as instant tax write offs.
$25 million will be given to farmers in drought­affected areas to combat pest animals.
Cattle farmers in Australia's north will recieve $101.3 million in funding over four years to better
cattle supply chain infrastructure.
Losers
Online streamers, downloaders
The 'Netflix tax' will see Australian users pay more for the streaming service, resulting in $350
million in revenue over the next two years
The GST based has been broadened to incorporate digital goods purchased overseas, effective
from July 1.
Public servants
More federal government employees appear likely to lose their jobs.
"Smaller Government" measures will affect servants in the Health portfolio, Education portfolio,
and Immigration and Border protection.
Australians living abroad
From July 1 2017 Australians working overseas with HELP debts will be required to repay their
loans. The threshold for repayment will remain the same (A$53,345 in 2014­15).
After January 1 2016 individuals with HELP debts who plan to leave Australia for a period of six
months will have to register with the ATO. Those already overseas will have to register before 1
July 2017.
Australians on certain types of pensions, including Disability Pension and the Age pension, will
have their payments cut after being overseas for more than six weeks, down from the previouscap of 26 weeks.
Depreciation boost for small businesses
Tuesday, 12 May 2015
The government has promised in tonight’s budget to provide
small businesses with an immediate deduction for all
individual assets costing less than $20,000.
The budget paper stated that all small businesses will get an immediate tax
deduction for every asset they buy costing less than $20,000. Currently, the
threshold sits at $1,000.
This $20,000 limit applies to each individual item. Small businesses can apply this $20,000 rule to as
many individual items as they like.
Notably, these arrangements start tonight (yes, from 7.30pm AEST tonight) and continue until the end of
June 2017.
Treasurer Joe Hockey said in his budget speech that increasing the depreciation threshold will mean
improved cash flow for small businesses, and that it should encourage them to bring forward investment
in the assets they need.
“The new threshold will also mean small businesses spend less time tracking assets across years for
tax purposes,” the budget paper stated. “This cuts red tape and allows business owners to focus on
running and growing their business.”
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed
in 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).
The government will also suspend the current "lock out" laws for the simplified depreciation rules (these
prevent small businesses from re­entering the simplified depreciation regime for 5 years if they opt out)
until June 30, 2017.
Small businesses can access accelerated depreciation for the majority of capital asset types. Only a
small number of assets are not eligible (such as horticultural plants and in­house software). In most
cases, specific depreciation rules apply to these assets.
From July 1, 2017 the thresholds for the immediate depreciation of assets and the value of the pool will
revert back to existing arrangements.
Going overseas to work? You can't run from HELP
Tuesday, 12 May 2015 by Nathan Hewitt
Australian HELP graduates that work overseas will now have
to repay debts if they cross the repayment threshold
previously only applied to domestic graduates.
The minimum HELP repayment threshold of A$53,345 has been extended in
the budget to cover high­income earners that studied in Australia but moved
overseas to work.
“There is no good reason why Australians living overseas earning high incomes cannot pay back what
they owe to Australia,” the budget paper said.
Under the changes, which come into effect from 1 January 2016, debtors going overseas for more than
six months will have to register with the ATO. Those already overseas have until 1 July 2017 to register.
Repayment obligations will commence from 1 July 2017.
“Current HELP debt repayment arrangements are unfair”, the paper said. “Recovery of debts from
people living overseas is already undertaken by some other countries, including the United Kingdom
and New Zealand.”
In other overseas changes, the government will decrease the limit of pension access for Australians
who live abroad from 26 weeks to six weeks.
Under the changes outlined in the budget, a Disability pension or Age pension recipient lives in another
country for longer than six weeks will have their payments cut.
Work­related car expense claims simplified
Tuesday, 12 May 2015 by Steve Burnham
The federal budget has confirmed a foreshadowed change to
the way work­related car expense deductions are calculated.
Work­related expenses are the most common­claimed tax deductions, with the
Tax Office reporting that around seven million Australians make such claims in
any tax year – with one of the most common components being car expenses,
with nearly four million people claiming a work­related car expense deduction
each year.
Historically, governments of all political colours have supported this tax deduction, which presently
rings up more than $11 billion each year. The budget announcement however indicates that while the
principle is not about to change, the method for allowing this valuable tax deduction is to get an
overhaul.
At present, there are four different methods by which taxpayers can access this tax deduction. The four
options are:
cents per kilometre
the logbook method
12% of original value
one­third of actual expenses.
The government says the last two methods are used in less than 2% of cases, “and therefore are going
to be discontinued in this budget as a means of streamlining the system and reducing compliance
costs”.
The government says more than 80% of people use the cents per kilometre method, by which they
receive a deduction according to the size of the car’s engine. For small cars it is 65 cents, medium cars
76 cents and large cars 77 cents per kilometre, up to a cap of 5,000 kilometres each year.
It says that Motoring Association data shows that the average running cost for the top five selling motor
vehicles is 66 cents per kilometre. "Based on 2012­13 figures, this would see those who drive smaller
vehicles getting a slight increase in deductible expenses and those who drive larger cars having a
decrease in their deduction.”
For example, a person with an eligible 2.5 litre sedan would currently be able to claim at 76 cents per
kilometre compared to only 66 cents per kilometre under the new rules. On a 1,000 kilometre journey,
this would mean a $760 deduction under the current rules, but only $660 under the proposed rules.
The government says the average impact overall for those driving medium and larger cars would be a
loss of $85 a year, and that this measure “will result in a budget saving of $845 million over the forward
estimates”.
It emphasises however that for those drivers who believe their car related costs are greater than the 66
cents average, or those who drive more than 5,000 kilometres a year, will still be able to claim the
deduction for the full amount based on keeping a logbook.
Tax rate cut for small businesses, even
unincorporated ones
Tuesday, 12 May 2015 by Steve Burnham
In one of the best worst­kept secrets of recent times, the 1.5%
cut to the small business tax rate has been expected, but
how this generosity would be extended to unincorporated
small businesses remained mystery until tonight.
From July 1, 2015, there will be a 1.5% cut in the company tax rate applying to
small businesses (with turnover of less than $2 million) reduces the tax rate
applying to those businesses to 28.5%. This is expected to benefit some 780,000 incorporated small
businesses, 90% of incorporated businesses with annual turnover of less than $2 million.
As the tax cut will apply from July 1, 2015, companies with PAYG instalments can benefit from their first
payment after July 1, 2015.
The current maximum franking credit rate for a distribution will remain unchanged at 30% for all
companies, maintaining the existing arrangements for investors such as self­funded retirees.
However as only around 30% of small businesses are incorporated (the remainder are sole traders,
trusts and partnerships) the reduced 28.5% rate will have limited effect. But in a surprise but welcome
announcement, the budget papers reveal that, also with effect from July 1, individual taxpayers with
business income from an unincorporated business that has an aggregated annual turnover of less than
$2 million will be eligible for a small business tax discount.
The discount will be 5% of the income tax payable on the business income received from an
unincorporated small business entity. This discount will be capped at $1,000 per individual for each
income year, and delivered as a tax offset through their end­of­year tax return.
FBT cap for charities tightened
Tuesday, 12 May 2015 by Nathan Hewitt
A tax break that allows employees of not­for­profit
organisations to salary sacrifice meals and entertainment has
been officially curbed in this year’s Federal Budget.
The federal government is seeking to impose a Fringe Benefits cap of $5,000
on the meals and entertainment expenses, in hopes to regain hundreds of
millions of dollars in revenue.
The cap previously sat at $30,000 — an initiative that allowed charities and other similar groups to
compete with the private sector for the attention of prospective employees.
“We are limiting Fringe Benefits Tax entitlements on overly generous meal and entertainment
expenses, capping them at $5,000 a year per person, saving $295 million,” Joe Hockey said in his
Budget speech.
Startup costs to be written off immediately
Tuesday, 12 May 2015 by Steve Burnham
The budget has cleared the way for startup companies to be
able to immediately deduct the costs of starting their
businesses, rather than having to write these off.
The government confirmed that the new plan, which is part of its “Jobs and
Small Business” package revealed in the budget, is aimed at giving small
enterprises a boost.
From July 2016, new companies will no longer have to wait for five years before writing off startup
“professional costs”, and business registration will be streamlined with a single online registration site.
“Many people need the advice of lawyers and accountants when they start a business. This can be
expensive and drag on cash flow. Allowing these costs to be deducted immediately will allow more
money to be invested in growing the new business.”
The announcement also says small business owners will be able to change the legal structure of their
business without incurring a CGT liability. “This will reduce some of the complexity of starting a new
business and provide business owners with more flexibility.”
It also announced that “obstacles” surrounding crowdsourced equity funding will also be cut in an effort
to make accessing that funding easier.
Consultation is promised over coming months on the incumbent framework for the establishment and
regulation of corporations. “The consultation will investigate whether some of the regulatory
requirements can be removed or relaxed to reduce compliance costs and make it easier for small
businesses to innovate, grow and create jobs.”
No CGT when changing business structures
The budget has confirmed that small businesses with an aggregated annual turnover of less than $2
million will be allowed to change legal structure without attracting a CGT liability at that point.
CGT roll­over relief is currently available for individuals who incorporate but all other entity type
changes have the potential to trigger a CGT liability. The measure recognises that new small
businesses might choose an initial legal structure that they later find does not suit them when the
business is more established. The government gives the example of a sole trader changing their
business structure to a trust, in which case CGT roll­over relief will be available.
Depreciation boost for small businesses
Tuesday, 12 May 2015
The government has promised in tonight’s budget to provide
small businesses with an immediate deduction for all
individual assets costing less than $20,000.
The budget paper stated that all small businesses will get an immediate tax
deduction for every asset they buy costing less than $20,000. Currently, the
threshold sits at $1,000.
This $20,000 limit applies to each individual item. Small businesses can apply this $20,000 rule to as
many individual items as they like.
Notably, these arrangements start tonight (yes, from 7.30pm AEST tonight) and continue until the end of
June 2017.
Treasurer Joe Hockey said in his budget speech that increasing the depreciation threshold will mean
improved cash flow for small businesses, and that it should encourage them to bring forward investment
in the assets they need.
“The new threshold will also mean small businesses spend less time tracking assets across years for
tax purposes,” the budget paper stated. “This cuts red tape and allows business owners to focus on
running and growing their business.”
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed
in 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).
The government will also suspend the current "lock out" laws for the simplified depreciation rules (these
prevent small businesses from re­entering the simplified depreciation regime for 5 years if they opt out)
until June 30, 2017.
Small businesses can access accelerated depreciation for the majority of capital asset types. Only a
small number of assets are not eligible (such as horticultural plants and in­house software). In most
cases, specific depreciation rules apply to these assets.
From July 1, 2017 the thresholds for the immediate depreciation of assets and the value of the pool will
revert back to existing arrangements.