The document provides an overview and analysis of tax and superannuation changes from the 2016 Australian Federal Budget. Key points include reductions to the corporate tax rate, an increase to the small business tax discount, and the introduction of a $1.6 million cap on tax-free pension balances per person effective July 2017. The budget aims to benefit small businesses and individual taxpayers through tax cuts and expanded access to small business tax concessions. It also targets international tax avoidance and improving superannuation policy.
8. Personal Tax Rate Changes
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Taxable Income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19% of excess over $18,200
$37,001 – $87,000 [from $80,000] $3,572 plus 32.5% of excess over $37,000
$87,001 – $180,000 $19,822 plus 37% of excess over $87,000
$180,001 and over $54,232 plus 47% of excess over $180,000
From 1 July 2016
• Above rates exclude Medicare levy
• 2% Temporary Budget Repair levy expires at end of 2017 year
10. Corporate Tax Rate Reductions
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• The corporate tax rate will be
progressively reduced to 27.5%
• For 2016/17 the corporate tax rate is
27.5% for businesses with turnover
< $10 million
• From 2017/18 the threshold for
access to the 27.5% tax rate will
increase as follows, see table:
• Franking credits can be distributed in
line with rate of tax paid
• Unclear whether this refers to the
rate of tax paid in year of profit
derivation or year the dividend is
paid.
Income year
Annual aggregated
turnover threshold
Rate (%)
2015/16 (current year) < $2m 28.5
2016/17 < $10m 27.5
2017/18 < $25m 27.5
2018/19 < $50m 27.5
2019/20 < $100m 27.5
2020/21 < $250m 27.5
2021/22 < $500m 27.5
2022/23 < $1b 27.5
2023/24 None 27.5
14. Small Business Tax Concessions
• Small business entity turnover threshold increases from $2 million to $10 million
• Start date 1 July 2016
• Access to the following small business tax concessions
• 27.5% corporate tax rate
• Simplified depreciation rules
• $20,000 instant asset write off threshold (until 30 June 2017)
• Simplified trading stock rules
• Option to account for GST on a cash basis and pay GST instalments calculated by ATO
• Simplified method for paying PAYG instalments
• Other tax concessions e.g. FBT exemption for work related portable electronic devices from 1 April 2016 and car parking
exemption
• The $10 million threshold does not apply for access to small business CGT concessions
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17. Diverted Profits Tax
• Similar to the UK ‘google tax’
• Penalty tax of 40% on diverted profits
• Applies to groups with $1bn global turnover
• Exemption if Australian turnover < $25 million
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24. Things that have not changed
• Tax Free Pensions and Lump Sums – 60 and over
• Minimum and Maximum Pension draw down factors
• Access to Super Benefits and Preservation Rules
• Reach preservation age and
• Meet a condition of release (retirement)
• Concessional Contributions for 2015/16 and 2016/17
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26. $1.6m pension cap per person
• Assessed at
• 1 July 2017 for existing pensions
• Commencement day for new pensions
• Pension balances in excess of cap
• Must be rolled back to accumulation
- Usual preservation / tax rules apply to rolled back amount
- Investment income taxable again (15% on income, 10% on CG)
• Or removed from super
Otherwise, tax on both excess and associated earnings
Effective 1 July 2017
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29. $1.6m pension cap: example
• Jane and Bob are 70
• $2m each in super
• Currently, all in pensions (one each)
• Fund earns around $200k pa
• No tax paid
• They draw around $300k pa in pensions and want to keep it around there (even
though the minimum is $200k)
Balances in excess of cap
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34. $1.6m pension cap per person
• Realise large CG in 2016/17 before tax exemption lost
• Refresh cost base
• Also relevant for TRIS up to 1 July 2017 (when tax exemption no longer available)
• Multiple pensions
• How to keep tax free / taxable separate?
- Consider another fund
• Which to roll back?
• Is it worth withdrawing excess and investing in own name?
Action plan: lead up to 1 July 2017
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42. Non-concessional contributions
• Excess: treated in usual manner
• Release excess NCC + 85% associated earnings; OR
• Pay excess tax (currently 49%)
• Indexation: AWOTE, in $50k increments
• No changes to exclusions from NCC cap
• Small Business CGT caps
• Personal injury
These would remain in place and are in addition to NCC cap
Lifetime cap of $500k
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55. About the speakers
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Andrew is both a chartered tax adviser and a solicitor having worked with leading taxation
advisory teams in chartered accounting firms (both big 4 and mid-tier) and a top tier law firm.
Andrew’s expertise lies in
• providingtax advice
• leading tax due diligence assignments
• general tax planning and
• providingtax compliance services
His clients include family groups, private and public companies (including listed entities) and not
for profit groups.
Andrew Lam - Director, BCom, LLM, CTA
Services: Taxation, Large
Corporate, Corporate
Advisory, Not-For-Profit
t: +61 2 9232 5111
d: +61 2 9220 0381
e: andrew.lam@hillrogers.com.au
w: www.hillrogers.com.au
56. About the speakers
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Garvin’s extensive expertise and technical experience in income tax and superannuation makes
him a valuable advisor to his clients, including SMSFs, High Net Worth Individuals and SMES.
Garvin’s advises clients in
• Tax planning and compliance
• Wealth creation plans
• Retirement planning
• Regulatory compliance
Garvin is passionate about helping people to plan for the transition between work and
retirement in a way that sees their financial goals achieved.
Garvin Jones - Director, BBus, CA
Services: Superannuation
High Net Worth Individuals
and Professionals
t: +61 2 9232 5111
d: +61 2 9220 0346
e: garvin.jones@hillrogers.com.au
w: www.hillrogers.com.au