Joe Hockey described this year’s Federal Budget as the next step in the Coalition Government’s economic plan. Gone was the ‘hockey stick’ and all the talk of heavy lifting from last year’s budget, replaced instead with encouragement and enthusiasm to ‘get out there and have a go!’
In stark contrast to last year’s budget, big spending was everywhere in this year’s. The biggest items were a $5.5 billion package for small businesses and a $5 billion Northern Australia Infrastructure Facility. Australians with superannuation were also among the winners with Joe Hockey emphatically stating that there would be no new taxes on super under this Government.
The budget pegs Australia’s economic fortunes on ‘turning small business into big business’ with a small business package designed to increase spending, innovation and employment, and tax concessions clearly designed to have a positive effect on the rest of the economy. Multinationals, on the other hand, were the target of several integrity measures designed to reduce tax avoidance.
Daniel Arnephy outlines the key measures for businesses:
Small Businesses
For the purposes of these measures a ‘small business’ is one that meets the aggregated $2 million turnover requirements that already exist for other income tax concessions. The key measures are:
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From 1 July 2015 the company tax rate will be reduced from 30% to 28.5%.
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For unincorporated businesses there will be a 5% discount on the tax payable on business income from a small business, capped at $1,000 per individual for each year and delivered as a tax offset.
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The instant asset write-off threshold will be increased from $1,000 to $20,000 for small businesses that acquire and install assets ready for use between 7:30pm (AEST)12 May 2015 and 30 June 2017.
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Assets that are over $20,000 can continue to be pooled under existing asset pooling arrangements. However the pool can be immediately deducted where the balance is less than $20,000 for the same period of time as the increased immediate write-off. Finally, eligible taxpayers who left the small business depreciation system subject to current ‘lock-out’ rules (5 years), will be allowed to re-enter the system.
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From 1 July 2015, start-up businesses will be able to immediately deduct their professional start-up costs, as opposed to the current arrangement.
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From 1 July 2016 there will be CGT roll-over relief available to small businesses who switch their legal structure. Relief currently exists for any taxpayers who incorporate, so this will extend such relief to small businesses who choose any alternative operating structure, such as a trust.
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From 1 April 2016 there will be an FBT exemption for small businesses who provide employees with more than one qualifying work-related electronic portable device, even where they have substantially similar functions. The current exemption is for devices with substantially different functions.
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A single online registration site will be established to simplify business registrations.
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Previously announced changes to Employee Share Schemes to promote and boost entrepreneurial activity (introduced 26 March 2015) will be expanded to provide the CGT discount to interests that are subject to the start-up concession where options are converted to shares and sold within 12 months and provide the Commissioner with a discretion in relation to the 3 year holding period rule.
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Obstacles to crowd sourced equity funding will be removed as a compliment to the expanded tax concessions for Employee Share Schemes. This may include removing the costly elements of transitioning to a public company.
Large & Multinational Businesses
Promoted as being based on fairness, the Budget included several integrity measures targeting big and/or foreign businesses. These included:
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The ‘Netflix tax’, being the application of GST from 1 July 2017 to overseas businesses supplying digital products and services to Australians. Although these businesses will have increased compliance costs, this is ultimately a tax that will fall entirely on the end consumers.
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From 1 January 2016 the OECD’s new transfer pricing documentation standards will be implemented. These will give the ATO a global picture of how multinationals operate to assist in identifying tax avoidance. It will apply to companies with global revenue of $1 billion or more.
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Stronger penalties for multinationals with turnover greater than $1 billion will be introduced. Penalties for profit shifting and tax avoidance will double, but won’t change for taxpayers with a ‘reasonably arguable position’.
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Draft laws have been released to introduce a multinational anti-avoidance law into the existing general anti-avoidance provisions under Part IV A of the 1936 Tax Act. The intention is protect Australia’s tax base.
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The Government will introduce a separate single grossed-up cap of $5,000 for salary sacrificed meal entertainment and entertainment facility leasing expenses (meal entertainment benefits) for employees (of any sized business).
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Meal entertainment benefits exceeding the separate grossed-up cap of $5,000 can also be counted in calculating whether an employee exceeds their existing fringe benefits tax (FBT) exemption or rebate cap. All use of meal entertainment benefits will become reportable.