#Budget2016, how does it rate?

A WIN for Small Business & Technology Startups, punishing for rich Retirees....

Scott Morrison delivered the initiatives needed for small business to lead the way on building our economy into the future.   Here's our take on the #Budget2016.

Small business corporate tax relief and GST reporting

From 1 July 2016, it is now easier to qualify as a small business with the aggregate annual turnover increasing from $2M to $10M.  This mean that for GST reporting purposes businesses can now report on a cash basis and qualify for a 2.5% reduced tax rate from 30% to 27.5%.

What Azure Group thinks:  Great incentive for small business!  It will have an immediate and positive impact to cashflow allowing businesses to only pay GST once income is paid into their account.

Small business company rate cut

The tax rate for companies with an aggregate annual turnover of less than $10M will be reduced by 1% (28.5% to 27.5%) from 1 July 2016. The intention is to continue decreasing the tax rate on all companies to 25% by 2026-2027.  The maximum franking credit rate for dividends will remain at 30%.

What Azure Group thinks: It is a small move towards supporting small business in the short term with a long term strategy that is likely to change over time. It is fantastic news that business will not lose their franking credits.

Google tax has arrived

The government confirmed a crackdown on big business where multinational corporations will be held to account in paying tax to the Australian Government.

What Azure Group thinks: This is a smart and needed move by the Government in order to deliver fairness to all.  We need to take the pressure off Australians and this is a great initiative to make sure multinationals pay more tax on their profits in Australia.

Tax Incentive for Early Stage Investors

During last December’s Innovation Statement, the Turnbull government announced concessional tax treatment for investments made in qualifying Early Stage Innovation Companies (ESICs). Investors in ESICs may be eligible for:

  • A 20% non-refundable carry-forward tax offset on amounts invested, capped at $200,000 per year; and
  • A 10 year exemption on capital gains for investments held at least 12 months.

To be entitled to the tax offset and CGT exemption, various criteria must be met by both the ESIC and investor. For more information on whether your company qualifies as an Early Stage Innovation Company or whether you may be an eligible investor, please contact us.

What Azure Group thinks: While the tax offset has its benefits the big draw card of this measure is the CGT exemption, not only for investors but ESICs looking to attract funding.

Continuation of the Government’s immediate deduction

In last year’s budget, small businesses with an aggregate annual turnover of less than $2m could claim an immediate deduction for cost of an asset acquired to the value of $20,000. This has now been extended to businesses turning over up to $10m.

What Azure Group thinks: This is excellent for small business and will be especially useful for those accessing the R&D tax incentive as it brings forward both the tax deduction and the R&D net benefit.  The Government first increased then decreased and now significantly increased the threshold for immediate deduction. The policy remains to encourage small business to go out there and spend money to stimulate the economy. 

Changes to Superannuation

The budget announced unexpected changes to superannuation that tighten the availability of tax concessions and place new lifetime limits on what can be done with superannuation.  

The major changes announced, most of which will apply from 1 July 2017, are:

  1. A reduction in the concessional (before-tax) contribution limit from $30,000 or $35,000 (depending on the member’s age) to $25,000 per year.
  2. Individuals earning incomes of $250,000 or more will have their concessional contributions taxed at 30%, down from $300,000 currently. Below $250,000 concessional contributions will remain taxed at 15%.
  3. Other than for retirees with existing superannuation income streams, there will be a $1.6M lifetime cap that can be used to start a superannuation pension, with earnings on the rest of a member’s balance to still be taxed at 15%.
  4. A $500,000 lifetime cap on non-concessional contributions which applies from tonight. Given that current arrangements allow for $180,000 of non-concessional contributions per year this is a particularly severe and unexpected cut. This may effect planning decisions for the sale of small businesses that wish to rollover into superannuation.
  5. Anyone with a Transition to Retirement Income Stream should consult their adviser as they may be negatively impacted, with earnings on the funds supporting this stream to be taxed at 15% and not tax-free as they are now.
  6. And one piece of good news – new “catch-up” contribution rules to allow for five years of unused concessional contribution caps to be brought forward.

What Azure Group thinks: The Government have provided a clear objective for superannuation, which is that it is to ‘provide income in retirement to substitute or supplement the Age Pension’ – and not to be used for estate or tax planning. Individuals and their advisers should now focus more on what can done with the funds in superannuation rather than the source of these funds.  However we do see that superannuation remains a tax-effective environment for accumulating wealth and these changes are likely to impact only the top few percent of income earners.

Middle income earners to receive income tax relief

From 1 July 2016, the personal tax relief will increase the upper limit of the middle personal income tax bracket from $80,000 to $87,000 in a bid to catch-up on bracket creep.

What Azure Group thinks: Catch up on tax bracket creep

Youth Jobs PaTH

From 1 July 2017, young job seekers who need to boost their job-readiness will participate in a 3 stage intensive pre-employment skills training.  Employers taking on qualified interns will receive an upfront payment of $1,000 and a Youth Bonus wage subsidy of between $6,500 and $10,000 depending on the young person’s job readiness.

What Azure Group thinks: This is a superb way to improve youth job readiness and offer incentives to those businesses taking a chance on young and less skilled workforce.


SuperStream Compliance becomes compulsory for all Employers 1st July 2016 – less then 100 days to go!
Budget changes to Super - Bad Policy?

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Azure Group
Azure Group

Azure Group is the leading Chartered Accounting, Business Advisory and Strategic Advisory firm supporting the growth & success of fast growing entrepreneurial businesses.

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