With unemployment rising, government revenues collapsing and business confidence weakening in the last 12 months, much was riding on the Federal Budget 2015.
Here’s an overview of the key points every accountant needs to know about the Federal Government’s Budget 2015, which if agreed by Parliament and implemented as proposed, may affect not just your clients, but also your firm.
Small business taxation
One of the major changes for accountants will be an increased workload when it comes to calculating and processing small business tax deductions, as the government seeks to encourage businesses to invest in expansion and job creation:
- With immediate effect, tax-deduction thresholds on business-equipment purchases will be increased from $1000 to $20,000. This increase is to remain in effect for the next two years.
- Likewise, farmers will also be eligible for immediate tax deductions on the purchase of water-provision equipment, fencing and other agriculture-production-related assets.
- Startup firms will benefit from immediate deductions on startup costs and expenses.
- Employees compensated in part with shares by their employer will no longer pay tax on these shares until they receive financial gain from their sale.
- FBTchanges will see total deductions capped at $5000, while deductions will be expanded on mobile personal technology devices.
Additional measures aimed at supporting small businesses include:
- A tax cut of 1.5 percentage points for all companies with turnover below $2 million, taking their tax rate from 1 July this year to 28.5 per cent.
- While the rate of GSTremains fixed at 10 per cent, its scope will be expanded to incorporate all digital products and e-commerce transactions in Australia. Referred to in the media as the “Netflix tax”, this will mean businesses previously exempt from charging their customers GSTwill need to factor this change into their invoicing and accounting.
Broader corporate tax implications
Treasurer Joe Hockey proposed a “tax integrity anti-avoidance law” aimed at discouraging large multinationals from avoiding tax on Australian-based earnings. If passed, the law would require companies found to have avoided paying tax to back-pay twice the amount owed, plus interest. However, while aimed at large multinationals, there may also be implications for smaller businesses operating across borders.
Family and individual taxation
News coverage leading up to the budget was dominated by changes to family tax benefits, but the full scope of changes reads like this:
- A major overhaul will see funds redirected from paid parental leave to expand childcare assistance for working parents. Such a measure will impact a large number of families with young children. A side effect could be an increase in the number of parents establishing their own home-based business so they can stay at home for their children while circumventing reduced assistance to stay-at-home parents.
- While not effective until 1 January 2017, a proposed tightening of eligibility for the aged pension for wealthier individuals was announced. Should this measure be adopted, it will require a degree of financial preparation and re-budgeting for affected individuals that are approaching retirement.
- Changes to superannuation taxes were ruled out by Hockey, maintaining their current levels across the board.
Government rebates and incentives
- Firms operating in the field of medical research will be entitled to a share of $400 million in additional funding assistance.
- Unemployed youth are the target of a $330 million allocation of funds to transition to work.
Of course, all measures announced in the budget are subject to approval by Federal Parliament. For more detailed information and expert analysis on all the measures announced in the Budget. Each year, Thomson Reuters offer a FREE Weekly Tax Bulletin Federal Budget Report – look out for it in the lead up to Budget 2016.