Federal Budget 2016

Added on 04 May 2016 by Etairos Accounting

Budget Overview

The budget forecasts a $37.1 billion deficit for 2016/17, a blowout from the $33.7 billion anticipated in the December mid-year review.
The budget shows over the long term, lower company tax is expected to add one per cent to GDP
The "small business” tax rate, which was lowered from 30% to 28.5% in the 2015 budget, will go down a further point to 27.5% with the turnover threshold increased from $2m to $10m.
From July 1, the upper limit for the middle-income tax bracket will rise from $80,000 to $87,000 a year - stopping around half a million workers from jumping into the second-top marginal rate of 37 per cent.
Generous superannuation tax breaks will be removed from July 1, 2017, affecting about 4% of Australians each year.
These will include the introduction of a transfer balance cap of $1.6m on amounts moving into the tax-free retirement phase.
At the same time, about two million low-earning women are expected to benefit from a low income superannuation tax offset.
To get more young people into the workforce, a new program called Youth Jobs PaTH (Prepare, Trial, Hire) will start next year to give them pre-employment skills training, internships and provide businesses with a wage subsidy - at a cost of $752 million.
To ensure the budget is on track for balance in 2020/21, tobacco taxes will be increased by 12.5% a year from September 1, 2017, to raise $4.7 billion over four years.
A so-called Google tax, used in Britain, will be introduced while the ATO is given extra resources to reap $3.9 billion from a crackdown on multinational tax avoidance.
Australia's foreign aid budget has been cut by a further $224 million in the 2016-17 financial year, bringing official aid to $3.8 billion – representing an all-time low.
The federal government has delayed until 2018 the start date of its $3 billion childcare package unveiled in last year's budget.
That's because the savings it will need to pay for it - cuts to the parental payments of those on family tax benefit part B - remain stalled in parliament.

The Detail

For Business

For small to medium businesses, changes will include:

From 1 July the small business tax rate will be lowered to 27.5% and the turnover threshold to access it will increase from $2 million to $10 million
Each year the turnover threshold for access to the lower company tax rate of 27.5% will be extended to more businesses, from $10 million to $25 million in 2017-18, to $50 million in 2018-19 and $100 million in 2019-20
Phase two will see the threshold continuing to step up each year until 2023-24, before reducing the 27.5% rate for all businesses to 25% at the end of 10 years in 2026-27
An increase in the unincorporated small business tax discount to 8% and an extension of the threshold from a turnover of $2 million to less than $5 million
From 1 July 2016 the instant write-off for equipment purchases of up to $20,000 will be extended to businesses with a turnover of less than $10 million

Superannuation and retirement

The tax-free status of retiree accounts will stay but the Government will reduce access to superannuation tax concessions for the most wealthy from 1 July, the Treasurer said.The raft of changes to super announced included:

Establishing a lifetime non-concessional contributions cap of $500,000, effective immediately
Cutting the annual cap on concessional contributions to $25,000 from $30,000 for most people, or $35,000 for those over 50
Requiring people with combined incomes and superannuation contributions of more than $250,000 to pay 30% tax on concessional contributions, up from 15%
Introducing a Low Income Superannuation Tax Offset to replace the Low Income Superannuation Contribution when it expires on 30 June 2017 for individuals. This will allow people with an adjusted taxable income of $37,000 or less to receive an effective refund of some of the tax paid on their contributions, capped at $500
Introducing a transfer balance cap of $1.6 million on amounts moving into the tax-free retirement phase

Families

Beginning July 1 this year, the upper limit for the middle income tax bracket will increase to $87,000 per year from $80,000
This will prevent about 500,000 taxpayers from paying the 37% tax rate as a result of so-called 'bracket creep'
From April 1, 2017, a new initiative named "Youth Jobs PaTH – Prepare, Trial, Hire” will be launched to train young job seekers with pre-employment skills and help them hunt for and get jobs
An internship programme with up to 120,000 placements over four years will help young job seekers who have worked for six months to gain more experience
They will receive $200 per fortnight in addition to their regular income support payment while in the internship
Businesses that take on interns will receive an upfront payment of $1,000
Australian employers will be eligible for a Youth Bonus wage subsidy of between $6,500 and $10,000, depending on the young person's job readiness

Innovation and entrepreneurship

Backing co-investment in new spin-offs and starts-ups created by Australia's research institutions, through the CSIRO with the CSIRO's accelerator programme being expanded
Reforms to employee share schemes and crowd-sourced equity funding to make it easier for start-ups to raise capital
Changes to company tax loss arrangements
Public/private partnerships through the government Cyber Security Strategy to back Australian businesses to develop and promote their cyber security capabilities globally
Introducing a Low Income Superannuation Tax Offset to replace the Low Income Superannuation Contribution when it expires on 30 June 2017 for individuals. This will allow people with an adjusted taxable income of $37,000 or less to receive an effective refund of some of the tax paid on their contributions, capped at $500
Introducing a transfer balance cap of $1.6 million on amounts moving into the tax-free retirement phase

Infrastructure

Continuing to roll out the $50 billion national infrastructure plan to support economic growth.

$594m in additional equity to the Australian Rail Track Corporation for land acquisition and the continuation of pre-construction works and due diligence activities for an integrated inland rail link connecting Brisbane and Melbourne
$2bn for Water Infrastructure Loan Facility for new investment in dams and pipelines across Australia, building on the existing National Water Infrastructure Development Fund and the Northern Australia Infrastructure Facility
Around 180 other major projects are under construction or in the pre-construction stage, including the Midland, Bruce and Pacific Highways with new commitments for the Ipswich Motorway, Monash Freeway, Murray Basin Freight Rail and the Perth Freight Link
Under the Government's Asset Recycling Initiative, there will be $23 billion in additional infrastructure investment in projects including the Sydney and Melbourne Metro projects, light rail in Parramatta, regional road and rail freight corridors across NSW and Victoria, and flood mitigation works in the Northern Territory

Defence

The 20-year defence industry plan aims to secure an advanced local defence manufacturing industry, driving new high-tech jobs in Australia, including 3600 direct jobs as part of the Government's naval shipbuilding plan.

The 2016 Defence White Paper establishes a pipeline of work including:

Nine future frigates
12 offshore patrol vessels
12 new regionally superior submarines

The Government’s aim is to:

Boost Australia’s defence capability
Drive jobs and growth in the ship yards in Adelaide and Perth, and across the supply chain of the economy

Other taxes

The government will implement a further four annual 12.5% increases in tobacco excise, with the first increase to take effect on 1 September 2017. The net impact of the tobacco measures will raise $4.7 billion over the next four years.