budget-2016_172016-17 Federal Budget

budget-2016-172

The 2016 budget speech was delivered to parliament by the Treasurer Scott Morrison on Tuesday 3 May 2016.

Details of significant personal and small business tax measures are summarised on this page, and inner content pages are being progressively updated.

The official budget papers are published at budget.gov.au

Budget Speech (transcript)

Small Business Tax Concessions

  • From 1 July 2016 Small Business Entity turnover ceiling lifted to $10 million (from $2 million) with access to accelerated depreciation provisions and simplified trading stock and a lower tax rate (CGT concessions are not affected)
  • From 1 July 2016 Small Business Entity company tax rate reduced to 27.5% progressing to 25% by the year 2026-27
  • From 1 July 2016 the unincorporated small business tax discount (offset) to be increased to 8% for businesses with turnover up to $5 million (up from $2 million). The discount to be increased in phases until it reaches 16% in tax year 2026-27. The cap of $1,000 is retained.
  • From 1 July 2016 the instant write off for equipment purchases of up to $20,000 (expiring on 30 June 2017) is extended to businesses with a turnover of less than $10 million.  See Depreciation

Personal Tax

From 1 July 2016 the middle income tax bracket (with a marginal tax rate of 32.5 cents) is to be expanded from $80,000 to $87,000* – see tax rates 2016-17

Taxable IncomeProposed Tax Scale 2016-17
 0 to $18,200 Nil
 $18,201 to $37,000 19c for each $1 over $18,200
 $37,001 to $87,000* $3,572 plus 32.5c for each $1 over $37,000
 * $87,001 to $180,000 $19,822 plus 37c for each $1 over $87,000
 $180,001 and over $54,232 plus 47c for each $1 over $180,000

Superannuation

[Update 16 April 2017] 2016 Budget changes – more changes are in place but beware the backflips

[News: 8 Aug 2016] Treasurer confirms adjustments to proposed new superannuation cap rules

[Commentary] The Government’s budget super changes need urgent clarification and adjustment

  • From 1 July 2017 a limit is proposed on the amount of super which can be transferred in to the tax-free retirement phase of a super fund. This “transfer balance cap” has been set at $1.6 million (to be indexed to CPI in $100,000 increments). The measure is essentially retrospective; Super fund members will have until 30 June 2017 to conform. How will it work? See Budget Paper No. 2 and Budget fact sheet (PDF)  See also the account based pension rules.
  • From 1 July 2017 a new low income superannuation tax offset (LISTO) for adjusted incomes up to $37,000, to reduce the tax on concessional super contributions up to a cap of $500.  The offset will be non-refundable.
  • From 1 July 2017 the low income threshold of the receiving spouse of the low income spouse offset will be increased from $10,800 to $37,000
  • From 1 July 2017 the concessional superannuation contributions cap will be reduced to $25,000  (currently $30,000 or $35,000 if over 49)
  • From 1 July 2017 unused concessional contributions cap amounts (accrued from that date) can be used in a catch-up contribution for up to 5 years. (This is only available for those with a super balance of less than $500,000.)
  • From 1 July 2017  the Div 293 (30% tax rate) contributions tax to apply to earnings over $250,000 (currently $300,000).
  • Commencing 3 May 2016 7.30pm (AEST), there will be a lifetime cap of $500,000 for all non-concessional contributions since 1 July 2007. This will replace the current limit of $180,000 (which is up to $540,000 under the bring-forward rule) See also contributions caps
  • From 1 July 2017 the anti-detriment provision in respect of death benefits from super (which currently allow a member’s lifetime contributions tax payments to be paid into an estate) will be removed
  • From 1 July 2017 people aged 65-74 will no longer need to satisfy a work test for super contributions
  • From 1 July 2017 anyone up to the of age 75 can claim a deduction for personal superannuation contributions. This abandons the 10% rule and obviate the need for salary-sacrifice arrangements to enable before-tax super contributions.
  • From 1 July 2017 the tax exemption on earnings of assets supporting Transition to Retirement Income Streams will no longer be available

Company Tax Rates

See further: Company tax rates

  • From 1 July 2016 a tax rate reduction to 27.5% for businesses with an annual aggregated turnover of less than $10 million
  • From 1 July 2017 the turnover ceiling will be lifted annually such that all companies will be paying 27.5% by the year 2023-24.
  • From 1 July 2024 for the 3 years from 2024-25 to 2026-27 the company tax rate will progress to 25%

Private Companies – Div 7A Improvements

Following the Board of Taxation’s Post-implementation Review into Division 7A, the Government has said it will act on recommendations with effect from 1 July 2018.

Proposed measures to include:

  • A self-correction procedures to avoid penalties for inadvertent breaches
  • Appropriate safe-harbour rules
  • Simplified loan arrangements and other measures to provide greater certainty

See Budget Fact Sheet (PDF) and also Div 7A Loan Interest

Early-stage investors tax incentives

A number of adjustments (following consultations) to the measures announced in the 2015 MYEFO which include:

  • reducing the holding period from 3 years to 12 months for investors to access the CGT exemption; and
  • limiting the investment amount for non-sophisticated investors to qualify for the tax offset to $50,000 or less per income year.

GST and WET

  • From 1 July 2017 GST is extended to low value goods imported by consumers
  • Overseas suppliers with Australian turnover of $75,000 required to register and remit
    GST for low value goods supplied to consumers in Australia   GST Matters
  • From 1 July 2017 WET rebate cap reduced to $350,000 and to $290,000 on 1 July 2018  – see Minister’s media release and consultation

Further Information

Pre-Budget Speculation and News

In breaking news, the ABC has learnt some businesses will get a tax cut

Backbencher confirms Government will go ahead with backpacker tax

Budget 2016: What we know so far

PM Turnbull flags ‘substantial’ tax changes in the budget

No changes to negative gearing or capital gains tax policy in the May 3 budget

Malcolm Turnbull pens blog post take-down of report on negative gearing savings

Government to preserve negative gearing, warns about the alternative

Mathias Cormann denies the Government will lift taxes in May 3 Budget

COAG: Malcolm Turnbull withdraws income tax levy proposal

Government likely to cut company tax rate to 28.5 per cent

Federal Government signals possible company tax cut

Government outlines reasons it can’t offer income tax cuts

Malcolm Turnbull confirms early budget option

Backbench divisions growing serious over tax policy

CGT discount cut for super funds under consideration

Low income earners may be allowed to opt-out of super

Treasurer has eyes on reduction of superannuation tax breaks

Prime Minister rules out increasing the goods and services tax (GST)

Treasurer’s Press Club address:

  • no increase in GST
  • negative gearing is not the cause of budget problems
  • addressing bracket creep is important

Treasurer emphasises spending cuts and tax relief in May budget

This page was last modified on 23 Aug 2017