PrimeAdvisory 2016 Federal Budget Review
The Federal Treasurer Scott Morrison has handed down the Budget for the 2016/17 year.
This budget includes many initiatives to stimulate the economy and establish a 10 year economic plan that will transition Australia from a mining led economy to a stronger, more diversified economy encouraging innovation and job growth.
Narrowing the focus to tax, business and retirement this Budget offers:
- Tax breaks to manage bracket creep;
- Tax breaks & other related measures to stimulate small business;
- The most significant changes to superannuation since 2006 to align the superannuation system to its original purpose.
Key Budget announcements include:
- Reduced company tax rate for small & medium businesses;
- Reduced caps on concessional and non-concessional super contributions;
- Reduced tax concessions on super contributions for high income earners;
- The introduction of a cap on superannuation pension account balances.
The proposed changes are significant and will very likely alter the strategies that we develop & implement with many of our clients. Some of the measures have immediate effect with others taking effect from 1 July 2017.
It seems that the times (or at least the rules) are a changing – it goes without saying that the period commencing today through to 30 June 2016 & 30 June 2017 presents the perfect opportunity to review your circumstances and assess the impact of these changes.
The key initiatives for business include:
- Reducing the company tax rate to 25%;
- Tax discount for small unincorporated businesses;
- Small business entity turnover threshold increases from $2M to $10M meaning that instant deductions for assets purchased up to $20,000 are available;
- Simplifying Division 7A loans;
- Expanding tax incentives for start-up companies and angel investors;
- GST applying to all imported consumer goods;
- Youth employment incentives.
For a detailed wrap view the NTAA’s Budget Update
Personal Wealth & SMSF
The key initiatives for individuals and superannuation include:
- Personal tax cuts for middle income earners;
- $500K lifetime cap on non-concessional super contributions;
- Concessional contributions cap reduced to $25K;
- Concessional contribution eligibility rules simplified and expanded;
- Removal of contribution restriction for those aged 65 to 74;
- Tax exemption of TTR pensions removed;
- 30% tax on super contributions for high income earners. Threshold reduced from $300K to $250K;
- Tax free super balances capped at $1.6M;
For further details, we provide links to the Financial Planning Association and SMSF Association Federal Budget summaries:
30 June 2016 – Tax & Wealth Planning Opportunities
With May & June being the traditional tax planning season we see the following opportunities arising from the Budget:
- Small businesses (up to $2M) can claim an instant tax deduction up to $20,000 for business items purchased (or financed) prior to 30 June 2016;
- Tax deductible (concessional) superannuation contributions up to $30,000 (or $35,000 for those aged 49 or over on 30 June 2015) where the contribution is made prior to 30 June 2016;
- TTR pensions remain tax exempt until 30 June 2017;
- Non-concessional super contributions up to $500,000 remain available to those aged under 75. These concessions represent an opportunity to invest in the “tax friendly” super environment and should be strongly considered from a wealth creation and tax planning perspective;
- Tax free pensions remain “uncapped” until 30 June 2017.
There are many other Tax Planning opportunities available for Businesses and Individuals in the lead up to 30 June 2016. Keep an eye out for our Tax Planning 2016 emails in the coming weeks and please don’t hesitate to contact us with any questions or to book a Tax or Wealth Planning meeting.