Much of the rhetoric leading into this election year budget was about tax reform and innovation, however as usually happens with budgets there seems to be more tax changes than anything in the form of reform. Typically, there are always winners and losers and we will provide a summary below of what those changes mean to individuals, business owners and superannuants.

From a business perspective, the most significant thing to come out of this budget is the way the government now defines a small business. We actually wrote about this in a previous blog – The current $2m turnover threshold is simply inefficient. In our opinion there needs to be a review of the $2m threshold. Until then, it’s immeasurable to know exactly how many new jobs we are sacrificing – This is a big win for businesses trying to grow and subsequently create more jobs for the economy.

From a superannuation perspective there are a number of significant changes, namely the ability to make non-concessional contributions into superannuation being reduced from $180,000 per annum (currently) to a lifetime cap of $500,000.

Budget at a Glance

SMEs
• The small business entity annual turnover threshold will be increased from $2 million to $10 million from 1 July 2016 for the purposes of accessing the proposed 27.5 per cent company tax rate and certain existing income tax concessions including the $20,000 instant asset write off. The increased threshold will not apply for the purposes of accessing existing small business capital gains tax concessions.
• From the 2016-17 income year, the company tax rate for businesses with an annual aggregated turnover of less than $10 million will be reduced to 27.5 per cent. The threshold to access the 27.5 per cent tax rate will be progressively increased to ultimately have all companies at that rate in the 2023-24 income year.
• By 2026-27, it is proposed that the company tax rate will fall to 25 per cent for all companies
• The unincorporated small business tax discount will be increased in phases over 10 years from the current 5 per cent to 16 per cent, first increasing to 8 per cent on 1 July 2016. The current cap of $1000 per individual for each income year will be retained.
• GST reporting requirements for small businesses will be simplified from 1 July 2017

Other Enterprises
• The company tax rate will be progressively reduced to 25 per cent over 10 years.
• Targeted amendments will be made to improve the operation and administration of integrity rules for closely-held, private groups (in Div 7A of the Income Tax Assessment Act 1936) from 1 July 2018.
• Tax incentives for investing in early-stage innovative companies are to be expanded.
• Funding arrangements to attract more venture capital investment will be expanded.
• A new tax and regulatory framework will be introduced for two new types of collective investment vehicles.
• The proposed measure addressing the double counting of deductible liabilities under the tax consolidation regime announced in the 2013-14 Federal Budget will be modified.
• The treatment of deferred tax liabilities under the tax consolidation regime will be amended.
• An integrity measure concerning liabilities arising from securitisation arrangements announced in the 2014-15 Federal Budget will be extended to also apply to non-financial institutions with securitisation arrangements.
• The taxation of financial arrangements (TOFA) rules will be reformed and new simplified rules will apply from 1 January 2018.
• The tax treatment of asset backed financing arrangements such as deferred payment arrangements and hire purchase arrangements will be amended.

Superannuation
• The threshold at which high income earners pay additional contributions tax will be lowered to $250,000 from 1 July 2017. The annual cap on concessional superannuation contributions will also be reduced to $25,000.
• The tax exemption on earnings of assets supporting Transition to Retirement Income Streams will be removed from 1 July 2017.
• A lifetime non-concessional contributions cap of $500,000 will be introduced.
• The current restrictions on people aged 65 to 74 making superannuation contributions for their retirement will be removed from 1 July 2017.
• Individuals with a superannuation balance less than $500,000 will be allowed to make additional concessional contributions where they have not reached their concessional contributions cap in previous years, with effect from 1 July 2017.
• From 1 July 2017 all individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions.
• A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners from 1 July 2017.
• The income threshold for the receiving spouse (whether married or de facto) of the low income spouse tax offset will be increased to $37,000 from 1 July 2017.
• A balance cap of $1.6 million on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase will be introduced from 1 July 2017.
• The anti-detriment provision in respect of death benefits from superannuation will be removed from 1 July 2017.

Individuals and Families
• The threshold at which the 37 per cent marginal tax rate for individuals commences will increase from taxable incomes of $80,000 to $87,000 from 1 July 2016.
• The pause in the indexation of the income thresholds for the Medicare levy surcharge and the private health insurance rebate will continue for a further three years from 1 July 2018.
• Income tax exemptions will be provided for ADF personnel deployed in Afghanistan, the Middle East and in international waters.