Last night the government announced the 2016 Federal Budget - like the Abbott-Hockey budget last year, there have been some big changes to the taxation system and to small business in this years Turnbull-Morrison budget.
From 1 July this year, Small Business will get a further tax cut on the 2015 cut, the rate will be reduced for incorporated small business from 28.5% to 27.5% and the eligibility of small business rise form $2 million turnover to $10 million – this will slowly increase and by the 2026-27 all incorporated business with a turnover of less than $1 billion will be taxed at 25%.
The Small Business Tax offset for unincorporated businesses will also increase from the 5% brought in this year to 8% to match the tax cuts for companies.
The budget will also increase the middle income tax bracket from $80,000 to $87,000 in the 16-17 financial year – for someone earning $87,000 annually, they are set to save about $6 per week, only the top 25% of working Australians are set to benefit from this tax bracket shift.
The temporary budget levy will be removed for Australia's high income earners, bringing the top marginal bracket down by 2% to previous level of 45%. While this will reduce their tax burden, they are expected to be hit harder by super changes.
Accompanying the crackdown of the super tax concessions for high income earners (increase the tax rate to 30% for those who earn more than $250,000, up from 15% and a reduction in the concessional contributions cap to $25,000 from $35,000), the treasurer announced a Low Income Superannuation tax offset, which will give people with incomes up to $37,000 a refund of up to $500 in their super account of the amount of tax paid on there super contributions, making it more tax effective for these Australians to put additional contributions into super.
Other notable points to come out of last nights budget
· Unemployed Youth – government to offer jobseekers under 25 to register for pre-employment skills training and top ups to there regular income support payment to take on internships, where job seekers will work 15 to 25 hours a week for between 1 and 3 months, there will also be benefits for business to take on these job seekers.
· Property Owners – Negative gearing is here to stay, and there will be no change to capital gains tax – This is a win for homeowners, first home buyers hoping for some housing affordability relief in the current inflated property market are out of luck.
· University Students – Fee deregulation from last years budget has been put on hold, while funding cuts to universities and changes of how students loans are repaid and recovered are still on the table.
· Victorians – or more to the point Melbournians – $1.5 billon in funding previous paid to Victoria for construction of the East West link road project has been re-allocated to other infrastructure projects.
· Women – Along with the low income super offsets previously mentioned, partners will also get tax offsets for putting money into there low-income spouses super, this is to help the recognised problem of women who take time off to work to have children struggling when it comes to saving for their retirement.
With more measures this year effecting your taxable position, there is no better time than now to take advantage of our Tax Planning service before 30 June, call our office to book an appointment.