On 3 May 2016, the Australian Turnbull government handed down the 2016-2017 Federal Budget.
At Nitschke Nancarrow Accountants, we have analysed the announcement and highlighted some of the key issues that may impact our clients from 1 July 2016.
Small Businesses
– From 1 July 2016 the small business entity turnover will be increased from $2 million to $10 million.
– Small business $20,000 instant asset tax write-off will be extended until 30 June 2017.
– The company tax rate will be progressively reduced to 25% over the next decade.
Individuals
– The 37% marginal tax rate threshold for individuals will increase to taxable incomes of $87,000 and above from 1 July 2016. Currently the threshold is $80,000.
– Low income thresholds for the Medicare levy and surcharge will increase from the 2015/2016 income year:
| Family situation: | No Medicare levy payable: |
| Individuals | $21,335 |
| Couples (no children) | $36,001 |
| Single seniors and pensioners | $33,738 |
| Senior and pensioner couples (no children) | $46,966 |
| Additional amount for each dependent child or student | $3,306 |
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. A lifetime non-concessional contributions cap of $500,000 will be introduced.
| Concessional cap: | Current: | Proposed: |
| Under age 49 | $30,000 pa | $25,000 pa from 1 July 2017 |
| Age 49 or over | $35,000 pa | |
| Non-concessional cap: | ||
| Under age 65 at 1 July | $180,000 pa or $540,000 over 3 years | $500,000 lifetime cap from 7.30 pm on 3 May 2016 |
| Age 65 or over at 1 July | $180,000 pa |
– Individuals up to age 75 will be able to claim a tax deduction for their personal superannuation contributions up to the CC cap from 1 July 2017, regardless of their employment circumstances.
– Individuals with adjusted taxable income (ATI) of $300,000 currently pay an additional 15% tax (total of 30%) on concessional super contributions. The income threshold will be reduced to $250,000 from 1 July 2017.
– The work test (40 hours in 30 consecutive days) will be scrapped for individuals aged between 65 and 74 who wish to make super contributions.
– The low income spouse tax offset threshold will be increased from $10,800 to $37,000 from 1 July 2017.
– A $1.6 million cap will apply on the amount that can be transferred into the superannuation pension phase from 1 July 2017 with no restriction on earnings on the cap amount. Amounts transferred that are greater than $1.6 million (including earnings on the excess) will attract the same tax treatment as excess non-concessional contributions (excess un-refunded NCCs are currently taxed at 49%).
– A low income superannuation tax offset (LISTO) will be introduced to reduce tax on superannuation contributions for low income earners from 1 July 2017.
– Individuals with a superannuation balance of 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.
If any of the proposed changes relate to you, or you want to know more about how you may be impacted by the 2016-2017 budget, it is important to seek expert financial advice.
