Budget 2015: Overview

Prime Minister Tony AbbottThe Hon. Tony Abbott MP Federal Member for Warringah Prime Minister from 18.9.13 to 15.9.15 has promised a “dull” and “much less exhilarating” budget this year but this is a ‘make or break‘ Budget not just for Treasurer Joe HockeyThe Hon. Joe Hockey, Federal Member for North Sydney Treasurer from 18.9.13 to 21.9.15, but for Tony AbbottThe Hon. Tony Abbott MP Federal Member for Warringah Prime Minister from 18.9.13 to 15.9.15’s leadership as well.

With the steady stream of budget leaks becoming a deluge in recent days, indicators suggest the Abbott government’s second budget won’t be quite so boring for the small business sector.

Our future growth will come from growing small business into big business. Joe HockeyThe Hon. Joe Hockey, Federal Member for North Sydney Treasurer from 18.9.13 to 21.9.15

At the heart of the 2015 Budget is the $5.5 billion Jobs and Small Business and $4.4 billion Supporting Australian Families packages and $1.2 billion in new national security funding.

Central to the Jobs and Small Business package is $5 billion in tax cuts for small businesses with annual turnover below $2 million. 96 per cent of Australian businesses will be eligible for a tax cut. Incorporated small businesses will have their company tax rate cut to 28.5 per cent. Unincorporated small businesses will benefit from a 5 per cent tax discount, up to $1,000 per year.

The Jobs and Small Business package also provides over $330 million in targeted spending on new jobs initiatives aimed at employers and young job seekers to support the transition to work. Incentives for employers will also help mature age job seekers back into work.

Budget Overview

Small Business tax cut

Budget Speech 2015

From 1 July this year, small companies with annual turnover of less than $2 million will have their tax rate lowered, from 30 per cent to 28 and a half per cent.

Most small businesses are not run as companies. So we will also give an annual 5 per cent tax discount of up to $1,000 a year for unincorporated businesses. Via budget.gov.au

Budget Paper No.2: Budget Measures

The Government will deliver a tax cut to all small businesses through a 1.5 percentage point tax cut for small companies and a five per cent tax discount on income from unincorporated small business activity. These tax cuts will be available from the 2015‑16 income year, and are estimated to have a cost to revenue of $3.3 billion over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period.

The Government will reduce the company tax rate to 28.5 per cent for companies with aggregated annual turnover less than $2 million. Companies with an aggregated annual turnover of $2 million or above will continue to be subject to the current 30 per cent rate on all their taxable income.

Individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for a small business tax discount. The discount will be five per cent of the income tax payable on the business income received from an unincorporated small business entity. The discount will be capped at $1,000 per individual for each income year, and delivered as a tax offset. Via budget.gov.au

Accelerated depreciation

Budget Speech 2015

So I announce, that from 7:30pm tonight, small business can claim an immediate tax deduction for each and every item they purchase up to $20,000.

From tonight, it can be instantly written off to reduce your tax liability. Via budget.gov.au

Budget Paper No.2: Budget Measures

The Government will significantly expand accelerated depreciation for small businesses by allowing small businesses with aggregate annual turnover of less than $2 million to immediately deduct assets they start to use or install ready for use, provided the asset costs less than $20,000. This will apply for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June 2017. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed in the small business simplified depreciation pool (the pool) and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).

The Government will also suspend the current ‘lock out’ laws for the simplified depreciation rules (these prevent small businesses from re‑entering the simplified depreciation regime for five years if they opt out) until 30 June 2017.

These changes will improve cash flow for small businesses and provide a boost to small business activity and investment.

Small businesses can access accelerated depreciation for the majority of capital asset types. Only a small number of assets are not eligible (such as horticultural plants and in-house software). In most cases specific depreciation rules apply to these assets. Via budget.gov.au

Budget 2015 – Growing Jobs and Small Business – Accelerated depreciation

All small businesses will get an immediate tax deduction for any individual assets they buy costing less than $20,000. Small businesses can apply this $20,000 rule to as many individual items as they wish. These arrangements start Budget night and continue until the end of June 2017.

Any assets over $20,000 can be added together (‘pooled’) and depreciated at the same rate. These assets are depreciated at 15 per cent in the first income year, and 30 per cent per year thereafter. Via budget.gov.au

Business registration changes

Budget 2015 – Growing Jobs and Small Business – Encouraging startups & entrepreneurship

The Government is also making it easier to start a business by streamlining business registration processes.

A single online registration site will be developed for business registration, including company registration. This site will be simple to use. It will provide all relevant information clearly and have integrated customer support.

Under the Streamlined Business Registration model, to be implemented by mid-2016, an individual planning to start a business will be able to log onto business.gov.au and access:

  • The Australian Business Licence and Information Service (ABLIS) to identify the government licences, permits, approvals and registrations required
  • ABN registration
  • Company registration
  • Business name registration
  • GST registration
  • PAYG (withholding) registration
  • Fringe Benefits Tax registration
  • An Australian Business Account to provide an integrated business account with government
  • Online payment for registration costs.

Via budget.gov.au

Professional advice write-offs

Budget Paper No.2: Budget Measures

The Government will allow businesses to immediately deduct a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice. This measure will be available to businesses from the 2015‑16 income year. This measure is estimated to have a cost to revenue of $30.0 million over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period. Via budget.gov.au

Crowdsourced equity

Removing obstacles to crowd-sourced equity funding will help promote small businesses access to finance. This will complement expanded tax concessions for Employee Share Schemes.

Budget Speech 2015

And to help small business grow, we are facilitating new opportunities for crowd‑source funding, making it easier for small investors to marry up with growing small businesses. Via budget.gov.au

Employee share schemes

Budget Paper No.2: Budget Measures

A number of other amendments accompany these changes to make employee share schemes more accessible for Australian businesses and their employees.

These changes will take effect with the remainder of the enabling legislation from 1 July 2015 and are estimated to have a small but unquantifiable cost to revenue over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period.

In the 2014‑15 MYEFO, the Government announced changes to the taxation of employee share schemes. These changes were designed to make employee share schemes more attractive and accessible for all companies in Australia, and provide additional tax assistance to eligible companies through a start‑up concession.

Further information can be found in the media release of 25 March 2015 [see below] issued by the Minister for Small Business. Via budget.gov.au

More restoring and rebuilding for Australian business | The Hon Bruce Billson MP

This morning I introduced the Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015 into the House.

The Bill improves and streamlines the taxation of employee share schemes. It removes key impediments introduced by the former Labor Government and creates a new ‘start-up’ incentive to restore and rebuild employee share schemes.

The legislation will make two main changes to the tax treatment of employee share schemes.

The Coalition will also extend the maximum time for tax deferral from seven years to 15 years, which will give companies more time to build their business and succeed.

The maximum individual ownership limit currently restricts employee ownership for those accessing the employee share scheme tax concessions. This Bill doubles this limit from five per cent to 10 per cent, which could help some founders and provide a boost for critical workplace team members.

The Government intends to bring the amendments into effect for new shares and options issued from 1 July 2015. Via bfb.ministers.treasury.gov.au

Capital gains exemption for business that change legal structures

Budget Speech 2015

That is why we will ease the financial strain by allowing business owners to immediately deduct the costs incurred when starting up a new business, or receive tax relief when restructuring their existing business. Via budget.gov.au

Budget Paper No.2: Budget Measures

The Government will allow small businesses with an aggregated annual turnover of less than $2 million to change legal structure without attracting a capital gains tax (CGT) liability at that point. This measure will be available for businesses that change entity type from the 2016‑17 income year. This measure is estimated to have a cost to revenue of $40.0 million over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period. Via budget.gov.au

Abolition of FBT on electronic devices

Budget Speech 2015

And in a further new policy initiative which is just common sense in the digital age, we are abolishing Fringe Benefits Tax on all portable electronic devices used for work, like mobile phones, laptops and tablets. Via budget.gov.au

Budget Paper No.2: Budget Measures

The Government will allow a fringe benefits tax (FBT) exemption from 1 April 2016 for small businesses with an aggregated annual turnover of less than $2 million that provide employees with more than one qualifying work‑related portable electronic device, even where the items have substantially similar functions. This measure is estimated to have a small but unquantifiable cost to revenue over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period. Via budget.gov.au

'Netflix' tax

Budget Speech 2015

In addition, it is unfair that overseas based businesses selling services into Australia may not charge GST when local businesses have to charge GST.

We will level the playing field for Australian businesses by mandating that foreign businesses supplying digital products and services are subject to the GST. Via budget.gov.au

Budget Paper No.2: Budget Measures

The application of the GST will be extended to cross border supplies of digital products and services imported by consumers from 1 July 2017. The measure is estimated to have a gain to GST revenue of $350.0 million over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period.

This measure will result in Australia being an early adopter of guidelines for business‑to‑consumer supplies of digital products and services being developed by the Organisation for Economic Co‑operation and Development (OECDOrganisation for Economic Co-operation and Development) as part of the OECDOrganisation for Economic Co-operation and Development/G20 base erosion and profit shifting project.

This change will require the unanimous agreement of the States and Territories prior to the enactment of legislation.

The Government will provide $265.5 million to the Australian Taxation Office over three years from 2016‑17 to continue a range of activities to promote GST compliance. Via budget.gov.au

Budget 2015 – Fairness in Tax and Benefits – Closing the digital tax loophole

Consumers are increasingly turning to the growing digital economy to purchase products and services from anywhere in the world which traditionally they may have purchased from Australian suppliers. Improving the tax system by ensuring the GST applies to digital products and services imported by Australian consumers will help level the playing field between domestic and international suppliers and ensure that all suppliers pay a fair share of tax. This will result in a more consistent application of the GST to digital products and services.

The OECDOrganisation for Economic Co-operation and Development is developing  guidelines  for business-to-consumer supplies of imported digital products and services as part of the Base Erosion and Profit Shifting project. These are expected to be finalised by the end of 2015. Via budget.gov.au

Multinational tax disclosure

Budget Speech 2015

As a result of Tax Office investigations we have identified 30 large multinational companies that may have diverted profits away from Australia to avoid paying their fair share of tax in Australia.

Tonight I am releasing the details of a new Multinational Anti‑Avoidance Law, that will stop multinationals using complex schemes to escape paying tax.

Under this new law, when we catch companies cheating, they will have to pay back double what they owe, plus interest. Via budget.gov.au

From the Budget Paper No. 2:

The Government will introduce a new targeted anti‑avoidance law in Part IVA of the Income Tax Assessment Act 1936 aimed at multinationals that artificially avoid having a taxable presence in Australia. The new law will apply to tax benefits obtained from 1 January 2016 (under both new and existing schemes). This measure is estimated to have an unquantifiable gain to revenue over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period.

The new law will target approximately 30 companies where:

  • the activities of an Australian company or other entity are integral to an Australian customer’s decision to enter into a contract;
  • the contract is formally entered into with a foreign related party to that entity; and
  • the profit from the Australian sales is booked overseas and subject to no or low global tax.

Where such arrangements are entered into for a principal purpose of avoiding tax, this measure will ensure that the profits from Australian sales are taxed in Australia.

This measure will apply to companies with global revenue of $1 billion or more. Via budget.gov.au

Budget Paper No.2: Budget Measures — new transfer pricing documentation standards

The Government will implement the Organisation for Economic Co‑operation and Development’s new transfer pricing documentation standards from 1 January 2016. The Government will provide the Australian Taxation Office (ATO Australian Taxation Office) with $11.3 million over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period to implement the new standards. This measure is estimated to have an unquantifiable gain to revenue over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period.

Under the new documentation standards, the ATO Australian Taxation Office will receive the following information on large companies that operate in Australia:

  • a Country‑by‑Country Report showing information on the global activities of the multinational, including the location of its income and taxes paid;
  • a master file containing an overview of the multinational’s global business, its organisational structure and its transfer pricing policies; and
  • a local file that provides detailed information about the local taxpayer’s intercompany transactions.

Together these reports will provide the ATO Australian Taxation Office with a global picture of how multinational entities operate, assisting it to identify multinational tax avoidance.This measure will apply to companies with global revenue of $1 billion or more.The Government will double the maximum administrative penalties that can be applied by the Commissioner of Taxation to large companies that enter into tax avoidance and profit shifting schemes. The increased penalties, under Schedule 1 to the Taxation Administration Act 1953, will help to deter tax avoidance and will apply for income years commencing on or after 1 July 2015. This measure is estimated to have an unquantifiable gain to revenue over the forward estimatesThe forward estimates are the estimated financial statement projections for the four years following a budget (the budget year and the three out years after the budget year). period. Via budget.gov.au

Budget 2015 – Fairness in Tax and Benefits – Diverting profits from Australia

The Government is taking action on multinationals that exploit loopholes and artificially structure to avoid paying tax in Australia or elsewhere in the world. To the extent this erodes Australias tax base, this may mean that individuals and other businesses face higher rates of tax in the future, hurting the economy and jobs, if action is not taken. A business in Australia, that is part of a large multinational group, employs thousands of highly skilled Australians who undertake significant levels of economic activity to generate profits. Via budget.gov.au

Budget 2015 – Fairness in Tax and Benefits – Multinational Anti-Avoidance Law

From 1 January 2016, the new law will ensure that when Australian customers deal with an Australian subsidiary or local entity that is integral to the customers decision to enter into the contract, those Australian sales will be recognised as Australian income. Approximately 30 large multinational companies are suspected of diverting profits using artificial structures to avoid a taxable presence in Australia. Where the law applies, multinationals will be subject to the Governments new doubled penalty regime for tax avoidance and profit shifting schemes.

Approximately 30 large multinational companies are suspected of diverting profits using artificial structures to avoid a taxable presence in Australia.

This is only the beginning. The Government will commence consultations with the community on whether further amendments are required to Australian law, consistent with the work being carried out by the G20 and OECDOrganisation for Economic Co-operation and Development, to address other profit shifting strategies used by multinationals to avoid paying tax in Australia on economic activities performed in Australia . Via budget.gov.au

2015-16 Budget Papers

Growing Jobs and Small Business
Fairness in Tax and Benefits
Budget Papers

 

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