2015 Federal Budget Summary

The 2015/16 budget announcement was small business friendly and in general well received. We have summarised a number of the key announcements below:

SMALL BUSINESSES (TURNOVER LESS THAN $2 MILLION)

Effective immediately

Small business will be able to obtain an immediate deduction for most depreciating assets costing less than $20,000. The $20,000 threshold applies to each individual asset purchase.

From 1 July 2015

Companies with a turnover of less than $2 million will have their corporate tax rate reduced by 1.5% from 30% to 28.5%.  It is also proposed the maximum franking credit rate for distributions will remain unchanged at 30% for all companies, meaning there is no change to a shareholder’s effective tax rate who receives fully franked distributions from these companies.

Individuals who include business profits in their taxable income from unincorporated small business (sole traders, partnerships and trusts) with a turnover of less than $2 million will receive a 5% discount on the tax payable on their business income capped at $1,000 per individual. The 5% discount will be in the form of a tax offset.

Immediate deductions will be available on professional expenses associated with starting a business such as company incorporation costs, legal and accounting advice rather than being spread over 5 years.

From 1 April 2016

The current annual FBT limitation of one qualifying work – related portable electronic device will be removed for small businesses.

From 1 July 2016

There will be capital gains tax relief for small businesses wishing to change their legal structure.

STARTUPS

From 1 July 2015

It will be easier for small business to crowd source equity funding by having simplified disclosure and reporting requirements with ASIC.

New employee share scheme rules will come into place which has been long overdue for startups. Employee shareholders in startups with an annual turnover of less than $50 million, which aren’t listed on the stock exchange and are less than 10 years old will be able to defer paying tax until their options are exercised and converted into shares. Companies will be able to issue options or shares to their employees at a small discount and for shares the discount will be exempt, while for options the discount will be deferred from income tax. Minor amendments that were announced in the budget included eligible venture capital investments being excluded from the aggregated turnover test and grouping rules,  the capital gains tax discount will be available to ESS interests that are subject to the startup concessions where options are converted to shares and sold within 12 months of exercise and the Commissioner of Taxation will be able to exercise discretion in relation to the minimum three year holding period where there are factors outside the employee’s control that make it impossible to satisfy this criteria.

FAMILIES AND INDIVIDUALS

From 1 July 2015

Only two methods for calculating car expenses will be available, the log book method and the cents per kilometre method. The cents per kilometre method will also change to a flat rate of 66c per kilometre.

From 1 July 2016

Any HELP debtors who are residing overseas for more than six months will be required to make repayments on their HELP where their worldwide income exceeds the HELP minimum repayment threshold (currently $53,000).

Most working holiday makers will be considered as non-residents for tax purposes meaning they will be subject to non resident tax rates and will not benefit from any tax free threshold.

From 1 July 2017

A new childcare subsidy model will be introduced with amounts paid to approved childcare centres based on family income and subject to a work activity test. Families earning less than $60,000 receive a subsidy of 85% of the actual fee paid up to an hourly fee cap. The subsidy then tapers to 50% for families earning around $170,000 or more. For families on income of $180,000 or more the subsidy will be capped at $10,000 per child per year. There is no cap for families on incomes less than $180,000.

It is proposed that GST will apply to any digital supplies and intangibles made to Australian consumers who are not registered for GST. The proposed changes include digital products such as streaming or downloading of movies, music, apps, games and e-books as well as other services such as consultancy and professional services.

If you have any questions about the budget you can contact us here, call one of our accountants in North Sydney, Chatswood or Crows Nest on 02 9216 7640 or contact you accountant, tax agent or tax adviser.