Personal tax measures

Whilst there were no significant taxation proposals in this year's Budget, the Government has made some relatively conservative changes to FBT exemption and employee share schemes. 

FBT exemption for electronic devices

 

Small business FBT exemption for work related electronic devices Effective date: 1 April 2016 Currently, an exemption from fringe benefits tax is available where an employee packages (or an employer provides) a portable electronic device (eg mobile phone, iPad, laptop etc).

This exemption is currently available where an employee packages (or is provided) multiple devices provided that the devices perform substantially different functions. 3 From 1 April 2016, where this device is provided (or packaged) with a small business employer (ie aggregated annual turnover below $2M), this exemption will be available across all such devices that are primarily used for work purposes. This change recognises that with the evolution of technology, there is an increasing level of similarly in functions that can be undertaken by items such as smart phones, tablets and some laptops.

FBT: meal and entertainment

A $5,000 grossed-up cap will be introduced for salary sacrificed meal entertainment expenses for employees of not-for-profit organisations from 1 April 2016. The cap previously sat at $30,000, allowing charities and other similar groups to compete with the private sector for the attention of prospective employees. Not-for-profit employees can now salary sacrifice meal entertainment benefits without reporting them. In addition, their employers will not have to pay fringe benefits tax.

Employee share schemes

Expanded tax concessions for employee share schemes from 1 July 2015, will allow employees to share in and gain from the future growth and success of the business. The new start-up concession ensures employees are not liable to pay tax up-front until they are able to grasp a benefit from the share options.

Other measures

The Government tightened access to pension payments as a result of decreases in the assets test. The maximum value of assets outside the family home a couple can hold while still qualifying for a part pension will be reduced from $1.15 million to $823,000. Pensioners with substantial private assets will have to draw on slightly more of their assets to maintain their current income levels in retirement. 

The asset test taper rate will be increased from $1.50 of pension per fortnight to $3 of pension for each $1,000 of assets over the relevant assets test threshold from 1 January 2017. It will allow those with moderate assets to receive a full or increased pension.

 

Budget focus on stimulating small business activity

The Budget has introduced a number of measures for small businesses designed to revive investment and support entrepreneurship and startups.

Tax cuts

The Government has followed through with its announced 1.5 per cent tax cut for small businesses with an annual turnover of less than $2 million, which will take effect from 1 July 2015. The Government will also provide a 5 per cent tax discount (capped at $1000) for small businesses that are unincorporated with an annual turnover of less than $2 million, such as sole traders and trusts.

Accelerated depreciation

Businesses that invest in new tools or machinery will receive an immediate tax deduction for any individual assets under $20,000 from 12 May 2015 until 30 June 2017. Currently, the threshold sits at $1,000. They can apply the $20,000 limit to as many individual items as they wish. 

Assets that exceed the $20,000 limit will be added to the entity's small business pool and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter. These were the current rules for assets costing $1000 or more. The Government will also suspend the current lock-out laws for the simplified depreciation rules. These will prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out until 30 June 2017. 

Measures encouraging business startups

In order to encourage business start-ups, business registration processes will be streamlined through the creation of a single website (business.gov.au), which allows new businesses to register using a one key identifier. The new online portal will be implemented by mid 2016. The Government will also change the regulatory framework for crowd-sourced equity funding, including simplified reporting and disclosure requirements, to provide small businesses with access to additional funding from innovative sources.

Business establishment costs

Small businesses will be able to immediately write off professional costs associated with starting up a company from the 2015/16 income year instead of over a five-year period. Business owners will be able to invest more money into the growth of their new business.

CGT relief reforms for small business

A new CGT relief measure will be available for small businesses that change their legal structures and do not necessarily involve incorporated entities from the 2016/17 income year. However, small businesses can only apply changes to the legal structure once.

Age pension changes - good and bad

The budget papers contained significant changes to the aged pension assets test that will come into effect on 1 January 2017.

Under the proposed changes, the value of assets you can have in addition to the family home to qualify for the full pension will increase significantly. However, the taper rate will increase from the current $1.50 per fortnight per $1,000 of assets over the lower threshold to $3.00 per $1,000 of assets. The government estimates this will mean 91,000 people will stop having access to part pensions and a further 235,000 people will have their part pensions decreased.

                  Assets test threshold - now
 

  Homeowner
Full Pension
Homeowner
cut-out
Non- Homeowner
Full Pension
Non- Homeowner
cut-out
 Single

 $202,000 $775,000 $348,500 $922,000
 Couple

 $286,500 $1,151,000 $433,000 $1,298,000


              Proposed assets test threshold from 1 January 2017

  Homeowner
Full Pension
Homeowner
cut-out (estimated)
Non-Homeowner
Full Pension
Non-Homeowner
cut-out (estimated)
 Single

 $250,000  $547,000  $451,500  $747,000
 Couple

 $375,000  $830,000  $575,000  $1,023,000

As a sweetener to those who will lose their pension, the government will guarantee eligibility for the Commonwealth Seniors Health Card (CSHC), which provides the same concessional access to pharmaceuticals as those on the pension.


The government also said it will scrap the proposal announced in last year's budget to index pension solely to CPI increases. As such pensions will continue to be indexed by the greater of CPI and the Pensioner and Beneficiary Living Cost Index plus benchmarked to a percentage of Male Total Average Weekly Earnings.

Budget outlook for individuals and families

The 2015 Budget made sweeping changes for individual taxpayers and families with its focus on improving the economy.

Car expense deductions

The Budget has introduced new modernised methods for calculating work-related car expense deductions from the 2015/16 income year. The '12 per cent of original value method' and the 'one-third of actual expenses method,' which are used by less than 2 per cent of those who claim workrelated car expenses will be removed. 

The 'cents per kilometre method' will be modernised, allowing workers to claim a deduction for each kilometre driven in the car for work based on a schedule of typical costs. Under the new regime, one rate will be set at 66 cents per kilometre to apply for all motor vehicles. Taxpayers can continue using the 'logbook' method of calculating expenses if they do not want to use the cents-per-kilometre approach. These changes will adjust car expense deductions to align with the average cost of running a car.

Ageing workers

A flexible wage subsidy will give older Australians approaching retirement an incentive to remain in the workforce with the possibility of receiving a bonus later. It will also shorten the length of time Australians over the age of 50 have to wait on income support or the pension before they qualify for job incentives. 

Amendments to the new Restart program will offer older workers incentives for training to further assist them with retraining for a job and prevent them from falling back on unemployment benefits or pensions.

In addition, employers who hire job seekers under the age of 30 or workers aged 50 or older will share in a redesigned national wage subsidy pool from 1 November 2015. Eligible employers will be granted a subsidy of up to $6,500 for hiring a job seeker under the age of 30, an indigenous job seeker, a parent returning to the workforce, or a longterm unemployed job seeker. They can also receive up to $10,000 under the Restart program for hiring workers aged 50 or older.

Families

The childcare scheme has received a major overhaul to support low income families. Families with access to maternity leave through work will no longer receive government assistance in the form of the existing Parental Leave Pay (PLP) scheme from 1 July 2016. This measure will prevent families from double dipping into both schemes.

Under the new proposals, both parents must do at least eight hours a fortnight of work, training or study to qualify for any childcare support. Families earning up to $65,000 will receive 85 per cent off childcare fees, while stay-at-home parents with a family income over $65,000 will no longer secure childcare subsidies.

A two-year nanny trial starting on 1 January 2016 will assist the parents of approximately 10,000 children, especially those working for emergency services or living in regional areas, without access to regular childcare services. 

Rural Australia

Farmers can continue the Drought Concessional Loan Scheme for another year. Farmers will also be able to claim fences and new water storage as tax write-offs. 

Power to amend fraud and evasion 

The Commissioner of Taxation has been granted power to modify the time limit for assessments and testing of fraud and evasion, which normally varies between two and four years.

Under subsection 170 (1), (2) and (3) of the Income Tax Assessment Act 1936 (ITAA), the Commissioner can adjust the assessment of an individual or small business entity within two years of the day they were given notice of the assessment.

A small business entity is an entity which carries on a business and has turnover of less than $2 million. A four year period of assessment still applies for other entities.

The Commissioner may revise an assessment under section 170 (5) when they believe there has been fraud or evasion. Fraud is not limited by a time period and is evaluated on the absence of veracity in a statement or carelessness to its truths.

Evasion is gauged from the avoidance or withholding of information in a statement.

Lower penalties are imposed for carelessness and recklessness. Carelessness attracts a penalty of 25 per cent of the tax avoided, recklessness 50 per cent and intentional disregard 75 percent. An additional uplift penalty of 20 per cent will be issued for fraudulent misstatement in a tax return.

The time period applicable for fraud and evasion commences when the assessment is made or any time afterwards.