2015 Budget Report Summary

On 12 May 2015, the Treasurer Mr Hockey handed down the 2015-16 Federal Budget.

Below are the taxation highlights:

SMALL BUSINESS

• Small business tax rates cuts

- The company tax rate for small businesses (an aggregated annual turnover of less than $2m) will be reduced by 1.5% (ie from 30% to 28.5%) from the 2015/16 income year (i.e from 1/7/15). However, the maximum franking credit rate for a distribution will remain at 30%.

- A 5% income tax discount will be introduced for individual taxpayers with business income from an unincorporated business, such as a sole trader, trust or partnership (that has an aggregated annual turnover of less than $2m).

• Small business asset accelerated depreciation write-off

- The Budget announced that small businesses (aggregate annual turnover less than $2m) would be able to immediately write off assets they start to use or install ready for use, provided the asset costs less than $20,000. ( The existing write-off threshold is $1,000). Eligible assets could include things like cars, vans, kitchens, machinery etc. This will apply for assets acquired and installed ready for use between 7:30pm 12 May 2015 and 30 June 2017. The threshold applies on a per asset basis, so several assets each costing up to $20,000 would qualify for the write-off. Assets valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period.

• Immediate deduction for business establishment costs

- An immediate deduction will be available for professional expenses that are associated with starting a new business, such as professional, legal and accounting advice. For example, legal expenses to establish a company, trust or partnership. The measure will be available to start-up businesses from the 2015/16 income year.

• CGT roll-over for relief for change to entity structure

- The government confirmed it will allow small businesses (with an aggregated annual turnover of less than $2m) to change legal structure without attracting a CGT liability at that point. CGT roll-over is currently available for individuals who incorporate but all other entity type changes have the potential to trigger a CGT liability. The measure will be available for business that change entity type from the 2016/17 income year.

• Broader FBT exemption for portable electronic devices

- Small businesses (with an aggregated annual turnover of less than $2m) that provide their employees with more than one qualifying work-related portable electronic device will be able to access the FBT exemption even if additional items have substantially similar functions as the first device.

PERSONAL TAX

• Personal tax rates

- The 2015-16 Budget did not make any changes to the current personal tax rates. The 2% Budget deficit levy (tax) on incomes over $180,000, which was announced in last year's Budget, has been legislated and applies for 3 years from 1 July 2014.

• Work-related car expense simplified

From the 2015-16 income year, there will be only 2 methods of calculating work-related car expenses deductions.

1. Cents per km method

2. Logbook method

SUPERANNUATION

The Government did not announce any major new superannuation measures in the Budget.

Please contact us if you have any questions in relation to the Budget.

Disclaimer - The material contained in this newsletter does not constitute advice. DPL is not responsible for any action taken in reliance on any information contained in this newsletter. Anyone reading the newsletter should not act upon material contained in this newsletter without appropriate consultation.