Budget 2016 Simplified

Posted Under: Accounting and Taxation Posted On 04/05/2016


Things you should know about your financial situation if you…


Earn $80,001 to $87,001 (or above)

Basically, instead of paying 37% tax, you’ll now pay 32.5%, not at a flat rate but only for earnings in this bracket. So for example, for those earning incomes in excess of $87,000, this measure will result in a total tax saving of $315.

Own an investment property

Despite all the talk prior to Budget night, you’ll be relieved to know that there are no changes to current negative gearing arrangements in this budget.

Own a ‘small’ company

(Note: Only applicable to Company’s, not applicable to Partnerships, Trusts or Sole Traders) The definition of ‘small’ used to mean an annual turnover of less than $2 million and because of this your tax rate for the 2016 tax year is 28.5%. Now, in the 2017 financial year, your tax rate will be cut to 27.5% if your company has an annual turnover of less than $10 million. This will benefit 870,000 businesses in Australia as of 1st July, 2016. The tax rate will reduce progressively to 25% by the end of the 2026-2027 tax year.

Also, currently small businesses (less than $2 million turnover) have access to small business concessions. This includes simplified depreciation rules, immediate tax deduction for the purchase of assets costing less than $20k, simplified trading stock rules, and they can do GST accounting on a cash basis. As of 1st July 2016, these small business concessions will apply to businesses with up to $10 million turnover.

Have taken time off work to raise kids

From 1st July 2017, if your superannuation balance is under $500k, you can make ‘catch up’ payments (unused concessional contributions) into your super when you return to the workforce. This will impact approx. 2 million Australians.

Are wanting to top up your super

The current concessional contributions cap is $30k per year for those up to age 50, and $35k for those aged 50 and over. As of 1st July 2017, the Government is lowering the annual cap on contributions entitled to the concessional tax rates to $25,000 for all individuals, regardless of age.

Also, as of 1st July 2017, all individuals up to age 75 will be able to claim an income tax deduction for personal superannuation, regardless of their employment circumstances (up to the concessional cap of $25k, of course).

Are about to retire

If you are currently using a transition-to-retirement (TTR) strategy, be aware that your retirement income streams from TTR will now be taxed under the plan announced last night. We believe this measure will apply to existing TTR income streams.

Earn over $250,000

You’ll be hit with 30% tax on your concessional super contributions. Less than three per cent of fund members will be affected by the lower concessional cap.

Want to put hundreds of thousands into your super

The Government has proposed the introduction of a lifetime non-concessional contributions cap of $500,000 that commences from 7.30pm on the 3rd May 2016. It will include all non-concessional contributions made after 1st July 2007, however all contributions made before 1st July 2016 will not result in an excess. Any contributions made after this date that exceed the $500k limit will need to be returned and subject to penalty tax!