Upload
hanrick-curran
View
513
Download
0
Embed Size (px)
Citation preview
www.hanrickcurran.com.auwww.hanrickcurran.com.au
2016-17 Federal Budget Tax Update
11 May 2016
Jamie Towers
2016-17 FEDERAL BUDGET UPDATE Individuals Business GST What else is new? What does this mean for tax planning?
experience. new thinking www.hanrickcurran.com.au
FEDERAL BUDGET $37.1 Billion Deficit Forecast Returning to surplus by 2021 (previously 2019)
BUT Reserve Bank dropped interest rates to 1.75% on
budget day plus possible further rate cuts Is the economy buoyant enough to reach these
targets?
experience. new thinking www.hanrickcurran.com.au
INDIVIDUALS Fixing Bracket Creep – 32.5% bracket extended
from $80,000 to $87,000
BUT – Maximum Saving is only $315
Will again become a problem in 5 yrs assuming 2% inflation (RBA target 2-3%)
Why no CPI increase?
experience. new thinking www.hanrickcurran.com.au
INDIVIDUALS – NEW TAX RATES2015/16 2016/17
Tax Thresholds
Threshold Rate Threshold Rate1 18,201 $0 + 19% > $18,200 18,201 $0 + 19% > $18,2002 37,001 $3,572 + 32.5% > $37,000 37,001 $3,572 + 32.5% > $37,0003 80,001 $17,547 + 37% > $80,000 87,001 $19,822+ 37% > $87,000
*4 180,001 $54,547 + (45% + 2%) > $180,000 180,001 $54,232 + (45% + 2%) > $180,000
experience. new thinking www.hanrickcurran.com.au
INDIVIDUALS
Medicare Increase
Individuals – starts at $21,335 ($20,896 2016)
Families – starts at $36,001 + $3,306 per child
experience. new thinking www.hanrickcurran.com.au
INDIVIDUALS – Other Measures Tobacco Tax – 12.5% rise x 4 ($40 a packet?)
Wine Equalisation Tax – more expensive wine?
Jobs Creation Plan – Jobs PaTH
$5 Bn Dental Plan
experience. new thinking www.hanrickcurran.com.au
INDIVIDUALS – What Didn’t Change? Negative Gearing Remains
Capital Gains Tax – 12 month general discount remains at 50%
Budget Repair Levy (2%) will apply until 30 June 2017 (will not get extended)
experience. new thinking www.hanrickcurran.com.au
BUSINESS – COMPANY TAX RATE CUT• Tax Rate Cut of 5% to 25% over 10 years
Company Tax Rate Cut to 27.5%
Year Turnover2016/7 10,000,000 2017/8 25,000,000 2018/9 50,000,000 2019/20 100,000,000 2020/21 250,000,000 2021/22 1/2 Billion2022/23 $1 Billion2023/24 All turnovers
experience. new thinking www.hanrickcurran.com.au
BUSINESS – COMPANY TAX RATE CUT Tax Rate Cut to 27% in 2024/25
Tax Rate Cut to 26% in 2025/26
Tax Rate Cut to 25% in 2026/27
experience. new thinking www.hanrickcurran.com.au
BUSINESS – COMPANY TAX RATE CUT Tax Rate CUT to 25% by 2027
Lets Put this into Perspective
Ireland Tax Rate is 12.5% - trading income (25% other)
UK – Reducing to 17% in 2020
experience. new thinking www.hanrickcurran.com.au
BUSINESS – COMPANY TAX RATE CUT Singapore – 17% (+ exemptions)
Hong Kong – 16.5% (+ exemptions)
USA (above $18.33M – 35%)
Global Average – 23.87% 2015 (source KPMG)
experience. new thinking www.hanrickcurran.com.au
BUSINESS – COMPANY TAX RATE CUT
A good start, but this needs to happen sooner
In 2027 average company tax rate will likely be lower than 23.87%
experience. new thinking www.hanrickcurran.com.au
BUSINESS – Small Business What is a ‘SMALL’ Business?
Turnover:
• $2M?• $5M?• $10M?• $20M?
experience. new thinking www.hanrickcurran.com.au
BUSINESS – Small Business Definition of ‘Small’ Business Expanded to $10
Million turnover (from $2M) from 1 July 2016
Applies to Small Business Measures (Division 328)
Small Business CGT Measures Turnover still $2M
Small Unincorporated business discount turnover now $5M
experience. new thinking www.hanrickcurran.com.au
BUSINESS – Small Business Definition of ‘Small’ Business Expanded to $10
Million turnover (from $2M) from 1 July 2016
Applies to Small Business Measures (Division 328)• $20K Instant Asset Write-Off• Accelerated Depreciation• Trading Stock Rules• GST – Cash Basis• PAYG• FBT
experience. new thinking www.hanrickcurran.com.au
BUSINESS – Small Business Small Business CGT Measures – Still $2M turnover 15 Year Exemption 50% Active Asset Reduction Retirement Exemption ($500,000 cap) Small Business Roll-over
experience. new thinking www.hanrickcurran.com.au
BUSINESS – Small Business Unincorporated Small Business Discount – turnover
definition $5M
Discount % Increases from 5% (2016) to 16% over 10 years (8% 2016/7)
Individual cap of $1,000 remains
experience. new thinking www.hanrickcurran.com.au
BUSINESS – All Business Division 7a Self Correction Mechanism for ‘inadvertent
breaches’ Safe Harbours Simplified Loan Arrangements Apply from 1/7/2018
experience. new thinking www.hanrickcurran.com.au
BUSINESS – New Companies / Start-Ups Incentives (Tax Offset and CGT Exemption) for
investing in ‘Innovative’ start up companies announced in MYEFO
Law passed last week - Applies from 1 July 2016
Investment Capped at $50,000 for non-sophisticated investors
experience. new thinking www.hanrickcurran.com.au
Non-Refundable 20% Tax Offset for investing in ‘Innovative’ start up companies (Capped at $200,000 pa)
CGT exempt gains and losses on disposal of shares held > 1 yr < 10 years
Does not apply to > 30% ownership, or Affiliates (control)
experience. new thinking www.hanrickcurran.com.au
BUSINESS – New Companies / Start-Ups
Criteria1. Company must be < 3 years old; or2. Incorporated in last 6 years and <$1M expenses; or3. Registered on ABR within last 3 years; and
experience. new thinking www.hanrickcurran.com.au
BUSINESS – New Companies / Start-Ups
Expenses < $1M in previous year; and < $200,000 revenue in previous year; and Unlisted; and Meet 100 point innovation criteria
experience. new thinking www.hanrickcurran.com.au
BUSINESS – New Companies / Start-Ups
BUSINESS – Larger & International Business $679 Million to ATO for anti-avoidance task force
(expected to reap $3.7 Bn) (Also targets high wealth individuals)
Transfer Pricing Rules Expanded in line with OECD• IP and Intangibles• Analysis must match substance
experience. new thinking www.hanrickcurran.com.au
BUSINESS – Larger & International Business Tax Consolidation – Removing Inequities –
subsidiaries with deductible liabilities; DTLs removed from ACA
TOFA to be simplified
Penalties for ‘Globally Significant Entities expanded from $4,500 to $450,000
experience. new thinking www.hanrickcurran.com.au
BUSINESS – Diverted Profits Tax (Google Tax) – 40% Aus Company / PE has ‘shifted’ profits to a foreign
related company through ‘management charges’ etc Tax paid overseas is < 80% of tax than would
otherwise have been paid in Aus. Reasonable to Conclude arrangement designed to
reduce tax No Economic substance UK has a DPT (yet to be tested – introduced this
year)experience. new thinking www.hanrickcurran.com.au
GST GST will apply to Low Value Good Imports from 1
July 2017
Current GST import exemption threshold is $1,000 – Proposed to reduce to $0
How to enforce small vendors to become registered?
experience. new thinking www.hanrickcurran.com.au
GST More Simplified GST Registration for non-residents
Same as registration proposed for the ‘Netflix’ tax
Netflix Tax law actually passed Parliament last week and will apply from 1/7/2017
experience. new thinking www.hanrickcurran.com.au
GST GST Cash Basis and GST Instalments Basis will be
extended with small business threshold to $10 Million (from 1 July 2016)
Simpler BAS reporting for small business ($10M turnover) – trial from 1/7/16, application from 1/7/17
experience. new thinking www.hanrickcurran.com.au
What Else is New? CGT – Look through treatment on Earn-out
Arrangements – New Law Finally Passed (applies from 24/4/2015) (originally announced in 2009)
Managed Investment Trusts Legislation finally passed (apply from opt in time after 1/7/2015)
This includes changes to Public Trading Trust rules. No longer a PTT merely because super funds own > 20% of units
experience. new thinking www.hanrickcurran.com.au
Key Tax Planning Measures from the Budget Reduction in Company tax rate will encourage more
companies rather than trusts – will affect future structuring decisions
For companies > $2 Million but < $10 Million turnover – • Delay Asset purchases >$1,000, <$20,000 until
2016/7 year• Defer income where possible until 2016/7 year
experience. new thinking www.hanrickcurran.com.au
www.hanrickcurran.com.au
Budget Brief:Superannuation
11 May 2016
Clive Todd
33experience. new thinking
What didn’t change?
Tax-free withdrawals for over 60’s The spelling of the word “superannuation”
34experience. new thinking
Top 3 change categories
Contributions Pensions Other Announcements
35experience. new thinking
Contributions
36experience. new thinking
Concessional Contributions Cap
Reduced to $25,000 from 1 July 2017 for everyone
2015/16 2016/17 2017/18
Under 50 $30,000 $30,000 $25,000
Over 50 $35,000 $35,000 $25,000
37experience. new thinking
Removal of The Work Test
Currently people aged 65 to 74 are required to work 40 hours within a 30 day period to be eligible to contribute
Removed as of 1 July 2017
Applies to both personal concessional & non-concessional contributions
38experience. new thinking
Increased Access to Personal Contributions Removes “10% rule”
Effective from 1 July 2017
All individuals under age 75 are able to claim tax deductions for personal contributions in addition to having employer contributions up to total of $25,000
39experience. new thinking
Catch-Up Concessional Contributions Unused concessional contribution cap amounts
can be carried forward
Calculated on a rolling basis over 5 consecutive years
Effective 1 July 2017
Restricted to individuals with a super balance less than $500,000
40experience. new thinking
Lifetime Cap for Non-Concessional Contributions Capped at $500,000 over lifetime
Effective 7:30pm (AEST) on 3 May 2016
Includes all non-concessional contributions made since 1 July 2007
41experience. new thinking
If non-concessional contributions exceed $500,000 between 1/7/07 & 3/5/16 - no need to withdraw but no further allowed
If non-concessional contributions exceeds $500,000 after 3/5/16 - it will be treated as excess contributions
Replaces current $180,000 per year limit
Impact of Lifetime NCC Cap
42experience. new thinking
Potential Contributions Strategies
43experience. new thinking
Non-working over 65s look to contribute post 1 July 2017 If super balance less than $500,000 look to utilise
“catch-ups” prior to any potential non-concessional contributions
Maximise concessional contributions in 2016 & 2017 financial year
Limited Recourse Borrowing Arrangements (LRBAs) become more attractive
Utilise “concessional catch up” to minimise one-off tax events i.e. large CGT event
Strategies for consideration
44experience. new thinking
Pensions
45experience. new thinking
Superannuation Transfer Balance Cap Restricts the total amount of super that can be in
converted to pension phase to $1.6 million (ie purchase price)
Effective 1 July 2017
Any amounts in excess of $1.6 million must be left in accumulation
46experience. new thinking
Subsequent earnings on pension balance will not be required to be withdrawn
If cap breached -> subject to tax on both excess amount & earnings
Existing pensions greater than $1.6 million will have to transfer excess to accumulation or withdraw from super
Will be indexed in $100,000 increments in line with CPI
Impact of Transfer Balance Cap
47experience. new thinking
Transition to Retirement Changes
Earnings on assets supporting Transition to Retirement Income Streams will no longer be tax free
Effective 1 July 2017
No longer able to treat income stream payments as lump sums for tax purposes
48experience. new thinking
Potential Pension Strategies
49experience. new thinking
Ideally equalise member balances – a couple can have a combined $3.2 million in pension
Utilise any unused $500,000 non-concessional cap
Contributions splitting – where concessional contributions made in the previous financial year are transferred to spouse
Strategies for consideration
50experience. new thinking
Segregate high earning assets in pension phase and leave lower earning assets in accumulation
Only withdraw minimum pension and supplement with lump sums from accumulation
Crystalise capital gains & bring forward income prior to 30 June 2017
More strategies for consideration
51experience. new thinking
Transition to Retirement still beneficial if over 60 as withdrawals are tax free and can be used to maximise concessional contributions
If in Transition to Retirement phase look to satisfy condition of release
More strategies for consideration
52experience. new thinking
Other Announcements
53experience. new thinking
Division 293 Tax
Additional 15% contributions tax for high earners Income threshold reduced from $300,000 to
$250,000 Effective 1 July 2017 Income includes taxable income, reportable fringe
benefits, net investment losses & concessional contributions
Only applies to contributions that exceed the $250,000 threshold
54experience. new thinking
Spouse Superannuation Tax Offset 18% offset available up to $540 for contributions made to
eligible spouse’s super
Income threshold increasing from $10,800 to $37,000
Effective 1 July 2017
Count towards spouse’s non-concessional cap
55experience. new thinking
Low Income Superannuation Tax Offset Refund of the 15% contributions tax for low income earners
Capped at $500
Apply to individuals with adjusted taxable of less than $37,000
Replaces Low Income Superannuation Contribution (LISC)
56experience. new thinking
Miscellaneous
Anti-detriment payments abolished
Objectives of superannuation to be enshrined in law
New retirement products innovation – tax exemption extended
57experience. new thinking
Important points to take home Pre 30 June 2016 - still make concessional
contributions & pension withdrawals as normal Don’t make any non-concessional contributions
without checking first! Accumulation phase still only attracts 15% tax rate Majority of changes effective 1 July 2017 Changes dependent on outcome of Election Don’t panic! Planning opportunities will be available
DisclaimersThis document contains information in summary form and discusses proposed but not legislated rules and is therefore intended for general guidance only.
It is not intended to be a substitute for detailed research or the exercise of professional judgement. It does not purport to be comprehensive or to render professional advice. The reader should not act on the basis of any matter contained in this publication without first obtaining specific professional advice.
We believe that the statements made by us in this document are accurate but no warranty of accuracy or reliability is given. Our conclusions are based on interpretations of accounting standards and other relevant professional pronouncements and legislation current as at the date of this document. Should the interpretations, accounting standards, other relevant professional pronouncements or legislation change, our conclusions may not be valid.
© Hanrick Curran, 2016
All rights reserved
experience. new thinking www.hanrickcurran.com.au
Topic \\ Date
Thank you!
www.hanrickcurran.com.au