2015 post budget presentation ubs

www.hanrickcurran.com.au

2015 Post Budget & Pre Financial Year EndTaxation Update

Jamie TowersTaxation Partner

3 June 2015

Backdrop

2experience. new thinking

Estimated 2015/16 deficit of -$35.1 bn representing 2.1% of GDP

A reduction of $6bn from 2014/15 (but an increase of $18 bn on previous est.)

Forecast to return to surplus in 2019/20 (as expected last year)

Payments remain high at 25.9% of GDP, falling to 25.3% over the forward est.

Concerning proportion of recurrent expenditure, not capital investment

Stable spending and recovery in receipts make much of the recovery in the budget position

Recovery in receipts driven by employment growth on the back of real GDP growth of:

2.75% in 2015/16; 3.25% in 2016/17

This leaves the budget susceptible to future shocks

FY

1971 FY

1976 FY

1981 FY

1986 FY

1991 FY

1996 FY

2001 FY

2006 FY

2011 FY

2016

-5.00%

-3.75%

-2.50%

-1.25%

0.00%

1.25%

2.50%

3.75%

5.00%Budget Balance

FY

1997 FY

2000 FY

2003 FY

2006 FY

2009 FY

2012 FY

2015 FY

2018

20.00%

21.00%

22.00%

23.00%

24.00%

25.00%

26.00%

27.00%Payments & Receipts

Receipts Payments

Budget Insights


Small Business GST Individuals Year End Planning

Budget Insights


Budget Insights


Budget Insights


Very little for non-small business Tax Discussion Paper released in March – little

substance Green ‘ideas paper’ to be released later this year White Paper with policies to take to next election –

due 2016

Small Business


Definition of “small” business: Aggregated turnover of less than $2 Million (when

aggregated with other businesses under same control)

Turnover test applies to current or previous year $2 Million threshold has been in place since at least

2001 with no indexation. Time to change?

Small Business


1.5% Company Tax Cut to 28.5% from 1/7/2015

Small Business


1.5% Company Tax Cut to 28.5% from 1/7/2015

Franking % to remain at 30%

Will result in some unfranked dividends

Small Business


Unincorporated Small Business Discount 5% discount on Business income in unincorporated

entities flowing to individuals Capped at $1,000 per individual

Small Business


Unincorporated Small Business Discount

Example:

Family business in family trust earns $80,000 of business income and distributes to Jack.

Jack’s normal tax on $80,000 would be $17,534.

Jack receives a tax offset providing a 5% discount of $876, meaning net tax payable of $16,658.

Small Business


<$20,000 Small Business Asset Write-off Previously been as high as $6,500 under previous

Government (Carbon Tax Initiative) but reverted back to $1,000 last year

Any individual assets purchased with a value less than $20,000 (+ GST)?

Deduction available in year asset is first used or installed ready for use

Applies from Budget night until 30 June 2017

Small Business


<$20,000 Small Business Asset Write-off Excluded Assets – Horticultural plants, Capital

Works; Assets allocated to Pools (ie software depreciation pool), assets under lease – Financing Impact!

Primary Production assets – can choose write-off or specific primary production rules

Assets Exceeding $20,000 get a 30% write-off (15% first year)

Small Business


<$20,000 Small Business Asset Write-off Caution! ATO Will be closely monitoring new ABN

applications and will likely create an audit program for contractors (who are otherwise just employees)

Small Business


Immediate Deduction for Professional Expenses to establish a business Current rules provide write-off of business set up

costs over 5 years From 1/7/2015 – immediately deductible

Small Business


CGT Relief for Change to Entity Structure (from 1/7/2016)

Currently roll-over relief only available for restructure into a company

Will allow changes to any structure Silent on treatment of revenue assets Stamp (Transfer Duty) still applies in most States

Small Business


FBT Exemption - Portable Electronic Devices Current rules – FBT exemption for the first device

only each year where devices have ‘substantially identical features’

Small Business


FBT Exemption - Portable Electronic Devices ipad and iphone have similar features Tablets and Laptops have similar features Small business will be able to provide more than 1

device without being subject to FBT Still a real issue for other businesses

Small Business


Starting a Business to be streamlined – all registrations in a single online portal (business.gov.au)

Interaction with ASIC or ATO just using ABN Raising funds to become simpler – Corporations Act

to be amended to allow easier access to Crowd-source funding

AgriBusiness


Farmers able to write-off capital expenditure on fencing and water facilities

Write-off Fodder Storage over 3 years

Other Business


R & D - $100M Expenditure Cap Government still aiming for 1.5% reduction in tax

offset despite it failing to pass in an earlier bill.

Other Business


Employee Share Schemes Rules will be fixed from 1/7/15 to ensure tax

consequences only when can sell shares to pay tax For some ‘small companies’ ($50 Million turnover) –

employees taxed as capital gain (incl 50% CGT discount) rather than as ordinary income

Other Business


Earn-Out Rules Further exposure draft legislation introduced

recently Broad intent to treat additional consideration under

‘look through’ earnout rights as part of main capital gain

Requires amendment of tax return No change to tax treatment of non-look though

earnout rights

Other Business


ATO – Power to fix law not operating as intended Power to Commissioner to issue a legislative

instrument with the effect of removing unintended outcomes of legislation

Commonwealth Penalty Units – up to $180 from 31 July 2015

GST


Netflix Tax – Overseas companies providing digital content to Australian consumers will become subject to GST (from 1/7/2017)

Requires support of States Collection and its enforcement is the main problem

as no requirement for overseas business to register

GST


Reverse Charge for Going Concern and Farmland Exemption not proceeding (policy announced last year)

No GST on taxable importations of < $1,000. (Again collection is a problem)

CHARITIES & NOT FOR PROFITS


FBT Cap on ‘Meal Entertainment Expenses’ Currently no FBT if benefits are below either a

$17,667 cap or a $31,177 cap. PLUS no FBT on any Meal Entertainment Expenses

From 1 April 2016 – proposed $5,000 cap on meal entertainment. Excess counts towards other caps.

Budget Paper indicates “all use of meal entertainment benefits will become reportable”

Families


Paid Parental Leave Election Promise – gone! No Double Dipping

Families – Child Care


Current Child Care Benefit, Child Care Rebate and Jobs, Education and Training Child Care Fee Assistance programmes abolished. Replaced with single means tested Child Care Subsidy

Subject to a new activity test for up to 100 hours of subsidised care per child per fortnight, paid directly to approved care service providers

Up to 24 hours per fortnight also provided where family income < $65,000 per year, do not meet the activity test – equivalent to two 6-hour sessions

All subsidies will be linked to ‘no jab, no pay’ from 1 January 2016, unless exempt on medical grounds



Family Income Thresholds up to $65,000 the Child Care Subsidy will be 85% of

the fee (up to a benchmark price); will reduce to 50% for family incomes of $170,000

and above a cap of $10,000 per child for the total value of

subsidies for family incomes of $185,000 and above



Family Income Thresholds

Family Income Per Child Subsidy CapUp to $65,000 85% of fee# n/a

$65,000 - $170,000 Tapers from 85% - 50% n/a$170,000 - $185,000 50% n/a

>$185,000 50% $10,000 pa# % of lower of fee or benchmark price

Activity (hours worked per fortnight) Subsidised hours (per fortnight)

8-16 up to 36 17-48 up to 72 49+ up to 100

Families


Funding linked to passage of Family Tax Benefits measures from 2014 Federal Budget (Legislation stalled in Senate) FTB Part B primary earner income limit will be reduced to $100,000 from

$150,000 FTB Part B payment will be limited to families whose youngest child is under 6

years of age ( 2 year transitional arrangement for families with the youngest child aged 6 and over on 30 June 2015)

The FTB Part A Large Families Supplement will be limited to families with 4 or more children.

The FTB Part A per child add on to the higher income free threshold removed.‑ FTB Part A payment of $750 introduced for single parents on the maximum

rate of FTB Part A whose youngest child is aged between 6 and 12 years from the point they become ineligible for FTB Part B.

The FTB Part A and Part B end-of-year supplements will return to the original amounts of $600pa for each FTB Part A child and $300pa for each FTB Part B family and will cease indexation.

Individuals


Maybe a tax cut? Tax cuts legislated from Labor Government Bill to repeal not yet passed (only effects low income individuals – no real change

above $80,000 of income)

Individuals


2012/13 2015/16 Legislated 2015/16 New Tax Threshold Rate Threshold Rate Threshold Rate Thresholds

1 18,201 19% 19,401 19% 18,201 19%2 37,001 32.5% 37,001 33% 37,001 32.5%3 80,001 37% 80,001 37% 80,001 37%4 180,001 45% 180,001 45% 180,001 45%

Low Income Tax Offset (LITO) $445

#1.5% above

$37,000 $300

#1% above

$37,000 $445

#1.5% above

$37,000

Effective tax free threshold 20,542 20,979 20,542 # Rate at which LITO reduced above threshold

Individuals


HELP Debts – repayments apply to overseas debtors If live overseas for > 6 months and have worldwide

income above HELP repayment threshold ($54,126 - 2016), then required to register with ATO and make repayments from 1/7/2017

Year End Planning


If possible – Defer income until next financial year Bring forward expenditure Review & write-off bad debts Make super contributions before 30 June 2015 Prepayments are effective for individuals and small

business Interest on Investment Loans Business Expenses

Year End Planning


Take the benefit of the $20,000 asset write-off For assets costing > $20,000 buy before 30 June as

still get 15% depreciation even if held for 1 day (eg – purchase a car for $50,000 on 30 June 2015.

you add it to the small business pool and get a $7,500 depreciation deduction for 1 day)

Year End Planning


If you are able to income split, take into account: Top Marginal Tax Rate - $180,000 Superannuation (Division 293) tax - $300,000 HELP repayment – 2014/15 - $53,345

Year End Planning


Trust Distributions – Check Trust deed for distribution resolution requirements

Ensure the trustee makes an income resolution and records in writing on or before 30 June 2015 (or other earlier date specified in deed)

If any Division 7A loans from private companies – ensure you have made minimum repayments and charged interest

Ultimate Tax Deduction

40

experience. new thinking

Give the gift that keeps on giving Donations over $2 to Deductible Gift Recipients

allow you to FEEL GOOD about helping the chosen charity AND you get to reduce your tax.

Hanrick Curran assists many fantastic charities – see details on our website

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, June 2015

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Economy & Finance

2015 post budget presentation ubs