14 July 2015 – Bills enabling Budget measures
In the last month there have been a number of bills either brought before or passed by the Senate, whose purpose is to enable measures introduced in the May 2015 Federal Budget. These include:
- Company tax rate reduction – The bill passed enacts the company tax rate reduction from 30% to 28.5% as of 1 July 2015 for small business entities with an aggregated turnover of less than $2 million. It is important to note that corporate SBEs will still be able to frank dividends to 30% even though they are only subject to a tax rate of 28.5%. Therefore, the SBE companies will still be able to extract prior year profits that have been taxed at 30% and frank to that extent.
- Tax cut for unincorporated entities, FBT holiday and portable devices, and immediate deduction for professional fees for start-ups – This bill is currently before the Senate and it introduces a small business income tax offset for individuals who operate a small business (ie: turnover of less than $2m) through an unincorporated structure. The tax offset is 5% of the income tax payable on the portion of the individual’s income that is small business income (ie: their share of the net small business income), capped at $1,000. This measure will be effective from the start of the 2015-16 tax year. The Bill also allows small business entities and individuals to immediately deduct certain costs incurred when starting up a business, including advice or services relating to the structure or operation of the proposed business as well as government fees and charges relating to establishing the business or its operating structure. These amendments do not extend the scope of what is currently deductible – they only apply to amounts that would otherwise be deductible over 5 years under the blackhole expenditure provisions. This measure will also be effective from the 2015-16 tax year. Finally, the Bill also extends the FBT exemption to allow SBE employers to provide their employees with more than one work related portable electronic device per FBT year for the 2016-17 FBT year onwards, even if those devices have substantially similar functions. Currently, an employer can only provide one such device per FBT year and qualify for the FBT exemption (ie: FBT would be payable in relation to any subsequent device.
- $20K instant asset write-off – This bill received Royal Assent on 22 June 2015, and it enacts the immediate deduction for an SBE (regardless of entity structure) for depreciating assets costing less than $20,000. In addition, an immediate deduction can be claimed for low pool balances for the 2015 income year if the pool balance is below $20,000 as at 30 June 2015 prior to claiming current year depreciation deductions. This increased threshold will apply for the 2015, 2016 and 2017 income years. There were also changes to the accelerated depreciation of assets for primary producers, who can now to deduct fodder storage assets over 3 years and deduction expenditure on water facilities and fences upfront. The measure applies to assets for SBEs or primary producers that were acquired after Budget night (ie: applicable to any acquisitions from 7.30pm AEST on 12 May 2015).
- Reforms to the taxation of employee share schemes – This bill, incorporating technical amendments announced in the Budget, has been passed and in broad terms it:
- Allows employees who have received options / rights to continue deferring tax until the options are exercised in some circumstances;
- Extends the maximum deferral period from 7 years to 15 years; and
- Increases the maximum ownership percentage for access to certain concessions from 5% to 10%
The Bill also contains specific measures that are aimed at employees of start-up companies.
- Double-dip on paid parental leave – This Bill is currently under review, and under the proposed reforms, from 1 July 2016 parents will no longer be able to receive employer-provided primary carer leave payments (or other like payments) as well as the full amount of parental leave pay under the Paid Parental Leave scheme
- Pension asset test changes – This bill has been passed, and it enacts reforms from 1 January 2017 to rebalance the assets test parameters by increasing the assets test-free areas and the taper rate by which a pension is reduced once the free areas are exceeded. The taper rate will revert back to the pre-2007 level of $3 (from $1.50).
- Social security for superannuants – This bill has been passed and it sees a larger proportion of a superannuant’s defined benefit income will be taken into account when applying the relevant social security income test, capping the proportion of income that can be excluded at 10%.
- Medicare levy low income threshold increased – This bill sees the Medicare levy low-income thresholds for singles, families and single seniors and pensioners increasing to take account of movements in the CPI so that low-income taxpayers generally continue to be exempted from paying the Medicare levy.