BUDGET ROUNDUP: EDITION ONE
There is a strong focus on small business and what the impacts and benefits will be for those in small business, including the definition of what a small business is!
1. Company tax rate change
Scott Morrison and the Government are fully committed to implementing a promised tax cut for business, despite disagreement by the opposition.
2. The definition of small business is set to change.
As part of the governments change to the corporate tax rate for small businesses, the definition of a small business has been changed to include those businesses with a turnover of up to $10 million dollars. This would extend a number of tax concessions to 90,000 more Australian companies. However, this is something that is opposed by both the Labor and Greens parties. The Greens refuse to budge on the definition change and it will mean that the final decision will sit with the senate.
3. The immediate asset write off scheme provides the ability for small businesses to immediately write off an asset purchase up to the value of $20,000 rather than having to depreciate it.
It is unclear whether this change in small business definition will allow those earning between $2 million and $10 million access to this benefit. By allowing it to be extended to those businesses beyond the $2 million mark will inject further spending into the economy and this is something that Peter Strong, the Council of Small Business Australia is in full support of. While it is set to finish at the end of June, it is unclear yet whether the Government will extend this.
While the Government has pledged to putting ‘small business first’ it will be unclear just how viable this is, based on their inability to get agreement from Labor and the Greens on many issues.
Small business isn’t the only area that is set for big changes in the May budget.
4. Superannuation.
Superannuation is also under a tight review. Concessional superannuation contributions cap reduced from $30,000 to $25,000 and non concessional contributions cap has been reduced from $180,000 to $100,000. However, unused concessional cap amounts will be able to be carried forward from the previous 5 years providing that their super balance is less than $500,000.
But it is those in retirement phase that are going to be impacted. A $1.6 million cap has been introduced on the amount that can be transferred to super in retirement phase. Previously this could be added to super where earnings were tax free. Now additional funds need to be kept in an accumulation account and taxed at 15%.
But the winners are those in paid employment (that will still be employed beyond 2025) where previous legislation has provided a super guarantee rate change to 12% by 2025. This will be increased incrementally up to that time. It will remain at 9.5% until 2021 where it will increase to 10%. From then each year it will increase by 0.5% till it reaches 12%.
How do these changes impact you? Reviewing your circumstances prior to these changes taking effect can ensure that you mitigate any negative impacts.
Stay tuned for Edition Two or get in touch with any questions you want answered contact us so we can make sure we keep bringing you relevant updates throughout the leadup to the Budget in May 2017.