The Budget without the BS
Yes, it’s the day after Budget night. The day where for a few brief hours accountants and economists are the cool kids and people who never read the Money Section of the paper now scan it in desperation with one burning question… ‘what’s in it for me?’
There is always a lot of noise and spin the day after Budget night. What’s important is to cut through that noise and not just figure out how you’re going to be impacted but to understand what action you should be taking now to ensure you’re better off as a result. Which is why this summary won’t include all the changes from last night’s Budget but will include a few key budget highlights and provide suggestions about what you should be doing (or not doing) to give you the best result.
It’s the Budget, without the BS
The biggest changes for businesses is the increase of the SBE (Small Business Entity) threshold to $10 million which will allow so many more business owners access to small business concessions. This includes access to the immediate deduction for assets costing up to $20k and the ability to account for tax on a cash basis. It’s a big one.
If you haven’t been able to access the SBE provisions but you’ll fall under the threshold next year then you may be better to delay purchasing assets up to $20,000 until after 1 July in order to receive an immediate deduction. You may also want to consider delaying invoicing to push income into the next financial year when you’ll be able to account for it on a cash basis.
The threshold at which the 37c marginal tax rate for individuals commences will increase from taxable incomes of $80,000 to $87,000 from 1 July, 2016.
If your taxable income is expected to be between these two amounts for the 2016 and 2017 financial year you’ll want to bring forward deductions so you receive a higher percentage tax deduction. That’s because if you purchase stationery in the 2016 financial year for example you’ll receive 37c in the dollar as a tax deduction and if you purchase it after 1 July you’ll only receive 30c. So don’t spend just for the sake of the deduction but certainly bring forward purchases you might be making next year by prepurchasing office supplies, prepaying insurance and telephone costs, prepaying conference and subscription expenses and so on. If you don’t have very many work related deductions but you have an investment loan you might consider prepaying up to 12 months interest
If your employers don’t offer the ability to salary sacrifice to superannuation, from 1 July 2017 you’ll be allowed to claim an income tax deduction for personal superannuation contributions.
Make a note to start making extra deductions (up to the concessional caps) from 1 July 2017 from your post-tax dollars and you’ll receive a tax deduction
Employees, Business Owners & Investors
For those of us less than 50 years of age, the amount we can contribute to superannuation pre-tax will be reduced from $30,000 to $25,000 from 1 July 2017. Plus the amount of post-tax concessional contributions will be capped at a lifetime amount of $500,000
Consider making pre-tax contributions of up to $30,000 this year and next year to take advantage of the ability to contribute to a lower tax environment in superannuation.
Employees, Business Owners & Investors
The threshold at which the additional 15% tax on certain concessional superannuation contributions will be taxed will be reduced from $300,000 to $250,000 from 1 July, 2017.
If you’re earning between $250,000 and $300,000 you may want to consider maximising your superannuation contributions and taking advantage of being able to contribute the extra $5,000 in the 2016 and 2017 years, therefore saving 15c in the dollar
Low Super Balances
From 1 July 2017, individuals with a superannuation balance less than $500,000 will be allowed to make additional pre-tax contributions where they have not reached their concessional contributions cap in previous years.
In English? If you haven’t contributed the maximum pre-tax dollars to superannuation because you’ve been concentrating on things like paying school fees, reducing the mortgage or funnelling money back into your business it appears you’ll be able to catch this up in later years. But there’s nothing you need to do about this until after 1 July 2017 when you might want to consider increasing your pre-tax super contributions if you’ve been underwhelming with them.
We’ve been expecting it for some time and from 1 July 2017 GST will be extended to low value goods imported by consumers, eliminating the current $1,000 limit.
Consider purchasing your overseas goods that are less than $1,000 before 30 June 2017.
If you’re aged between 65 and 74, from 1 July 2017 the current restrictions on contributing to superannuation will be removed. Specifically the ‘work test’.
If you want to contribute to superannuation and are caught by the work test, then make plans to start contributing from 1 July 2017.
Sure, there’s a stack more including $1.6 million superannuation transfer balance caps, further reduction to the company tax rate as well as a whole stack of non-tax spending and funding. Is it a good budget? Probably. Is it a great budget? In my humble opinion, no it’s not. But you’re never going to please everyone and what can be said is that it’s a ‘meh’ budget which for a current crop (of both sides of parliament) of fairly ‘meh’ politicians, it’s probably one we can expect.
Of course, if you’d like to take further advantage of these tax planning tips make sure you book in for one of our popular tax planning sessions by emailing email@example.com