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.

For a no obligation discussion about your situation, contact the team at Nitschke Nancarrow Accountants.

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