2016-17 Federal Budget Update

03/05/2016

Superannuation

• Concessional contributions capped at $25k each year.
• Lifetime limit of $500k for non-concessional contributions.
• A limit of $1.6m an individual can move to the tax-free retirement phase.
• Threshold for paying additional contributions tax falls from $300k to $250k.

Taxation

• Small enterprises are the big winners in this year’s budget.
• Reduction in company tax rate to 27.5% for those earning up to $10m a year.
• The 37% income tax rate will begin at $87k, rising from the current $80k.

Proposed changes

• Please note, the proposed changes in this presentation require passage of legislation through Parliament before becoming effective.
• The final form of these proposals may differ significantly.

For everyone

• Many of the proposed measures announced in last night’s federal budget were largely anticipated:
  • a modest income tax cut for those earning more than $80,000
  • broad changes to superannuation
  • tax relief for small and medium enterprises.
• The big winners from the budget stand to be small and medium-sized businesses; middle-income earners; and women returning to paid work.
• The government’s top priority is to see the proposed company tax cuts and personal income tax cuts start on July 1, 2016, which will put pressure on Parliament to pass legislation quickly.

Small business

Small enterprises are big winners in this year’s budget, under the government’s proposed “10-year enterprise tax plan” designed to boost growth, create jobs and drive Australia’s future economic prosperity. The measures proposed are to encourage start-ups and innovation.

• Tax relief for small and medium-sized businesses with the company tax rate falling to 27.5 per cent for those earning up to $10m.
• Immediate tax deductions given to small businesses in last year’s budget expanded to include entities with annual turnover of less than $10m.
• Further tax relief for unincorporated small businesses.
• Businesses with an annual turnover of less than $10 million will have access to simplified depreciation rules.
• Other concessions available to small business entities include simplified trading stock rules and simplified GST reporting requirements.
• Unincorporated small businesses
  • Tax offset will increase over the next 10 years from 5 per cent to 16 per cent.
  • Turnover threshold for small unincorporated entities will also increase from $2 million to $5 million. 

Women and lower income earners

• “Catch-up” super contributions scheme targeted at workers with relatively low account balances.
• Individuals with less than $500,000 in super will be able to make additional concessional contributions if they haven’t reached their caps in previous years.
• Unused amounts accrued from July 1, 2017 can be carried forward on a rolling basis for a period of five consecutive years.
• Low-income earners who make contributions will earn a tax offset.
• As will partners contributing to their low-income-earning spouse’s super.
• A Youth Jobs Path program to help young job seekers. 

Retirees & Pensioners

• Tax exemption on earnings of assets supporting transition-to-retirement income streams will be removed from July 1, 2017.
• Workers who have attained age 60 will still be able to draw a tax-free retirement-income stream while continuing to work and contribute to super.
• Those already in retirement phase with balances above $1.6m will be required to reduce their balance to $1.6m by July 1, 2017.

 

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Important information: This information is issued by Blueprint Advisors Pty Ltd and is a summary of Blueprint Advisors Pty Ltd understanding of the proposed Federal Budget 2016-17 changes announced on 3 May 2016. The proposed Budget changes outlined in this presentation are subject to the passing of legislation and, accordingly, may not become law or may change. Please note that the information is based on Blueprint Advisors Pty Ltd interpretation of the proposed changes as at the date of presentation. Accordingly, you must not do or refrain from doing anything in reliance on this information without obtaining suitable professional advice. This document may not be reproduced, distributed or published by any recipient for any purpose. It is general information only and has been prepared without taking into account the objectives, financial situation or needs of any person. Whilst every effort has been taken to ensure the information is accurate and reliable, no warranty is given as to the accuracy of the information and no liability is accepted for your reliance on the information. Statements made during the presentation do not and are not intended to represent financial advice or a recommendation to hold, acquire or dispose of any investment. Before acting on this information you should consider whether the information is appropriate having regard to your personal needs, financial circumstances and objectives. Investors should always read the Product Disclosure Statement for the relevant product and seek financial advice before making an investment decision. Some of this information may have tax implications. We recommend that you seek specialist tax advice on how it may impact your tax obligations, liabilities or entitlements. Examples shown in this publication are for illustrative purposes only and past performance is not indicative of future performance. Any investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Before making any investment decision you need to consider whether there are any adverse consequences for you, including exit fees, other loss of benefits or increase in investment risks.