In handing down his first national budget, the Federal Treasurer, Scott Morrison was quick to remind us that these are very sensitive times. According to Mr Morrison, the budget delivered on 3 May is intended to be a foundation upon which we can build a brighter and stronger economy for Australia to ensure our future prosperity.
A significant component of this “brighter and stronger” economy will rely on making not inconsiderable changes to the fabric of our retirement system, while simultaneously providing a big bonus for not just small business. In fact we can say that small business isn’t so small anymore!
1 July 2017 is earmarked as a major date for many reforms set to shape our economy. Many of these are bold changes! Not unsurprisingly for this government, we’ll get good incentives for business owners but it comes at the expense of self-funded retirees and higher income earners.
Heralding the biggest changes to superannuation since 2007, self-funded retirees and higher income earners will bear the brunt of the changes. The changes on the face of it seem contradictory to the essence of being financially independent and free of welfare support in retirement. It seems the intention of the changes is to continue to ensure the “integrity” of the superannuation system by stopping it from being a tax planning and estate planning mechanism. For the first time we’ll see the purpose of superannuation enshrined in legislation as “to provide income in retirement to substantiate or supplement the Age Pension”.
Business reaps rewards with a 10 Year Enterprise Tax Plan, aimed at helping small and medium businesses – currently employing around 4.9 million workers – to continue to drive jobs and growth. The plan involves lowering company tax from 1 July 2016 to 27.5% and increasing the threshold for businesses who can access this from $2m up to $10m. Our traditionally defined medium enterprises are a key winner here. But the big end also wins as the company tax rate is earmarked to be progressively reduce to 25% for all companies over a 10 year period.
The $20,000 immediate deduction for asset purchases by a ‘small’ business is extended to 30 June 2017. Note the eligibility for this has expanded to include businesses with turnover up to $10m.
Beware the Tax Avoidance Taskforce! With its extra funding the taskforce is expected to recover $3.7b by targeting multi-nationals, high net worth individuals and private groups who attempt to avoid their Australian tax obligations.
Some 500,000 tax payers will be pleased to see the threshold at which the marginal tax rate of 37% applies, increase from $80,000 to $87,000 from 1 July this year. This might just help to take some of the sting out of the application of GST to low value goods imported by consumers (yes, that online shopping basket!) due to start on 1 July 2017.
Sigh of relief…no changes to negative gearing anytime soon.
Coinciding with an official interest rate drop of 0.25% on the same day as the budget, the scene is well and truly set to put a flame under small business, making it burn brightly for our nation.
This isn’t a budget about having more money in your hip pocket, it’s about having faith in building for the future.
For the full Federal Budget 2016: Living within our means…or robbing Peter to pay Paul? article click here.