The 2016 Budget and End of Financial Year Tax Tips

The Treasurer, Scott Morrison handed down the 2016-17 Budget earlier this month stating that this budget is an economic plan, not just another budget.

He says it’s an economic plan that is the foundation of creating jobs and fostering innovation. It broadens a number of the initiatives in last year’s budget, and unlike many election year budgets, is fairly light on “sweeteners”, which given the current Federal Government debt balance, is a good thing. A good budget should be more about incentives for people to work and create rather than to receive, so on that level, we will give it good marks. Longer term more needs to be done to bring government spending under control, but that will have to wait for another time and a non-election year.

To summarise the main features of this Budget that impact a number of people:

Business Tax Cuts & Incentives

• Reducing the company tax rate to 25% over 10 years.
• Small businesses will have a 27.5% tax rate from 1 July 2016.
• A greater tax discount for unincorporated small business entitites – such a sole
  traders.
• The small business entity turnover threshold increases to $10m, broadening the
  access to a number of small business concessions like the $20,000 immediate write off to more businesses.

Superannuation

• Introduction of a lifetime cap on non-concessional contributions of $500,000.
• A reduction in the concessional contributions cap to $25,000 from 1 July 2016.
• A limit of $1.6 million on superannuation balances that receive nil tax treatment
  once a member starts to receive an income stream from their superannuation
  fund.
• Removal of the favourable tax treatment of transition to retirement pensions
  (generally for people between the ages of 55 and 60)
• The ability of individuals to better access personal tax deductions for
  contributions to superannuation, even if they have an employer making contributions for them. Previously it was almost impossible for an employee to make personal superannuation contributions and get a tax deduction.

End of Financial Year

For the end of financial year, here are some tips to keep in mind:

• If you generally maximise your superannuation contributions, make sure you have your contributions paid to your fund by 30 June (check with your employer if you are an employee that this will be done). The current limits of $30,000 (for those under the age of 49) and $35,000 (for those over the age of 49) will be reduced from 1 July to $25,000.
• If you have an investment property, consider prepaying your loan interest for up to the next 12 months before 30 June, to bring your interest tax deduction forward.
• For those in business:
  • Is your business turnover under $2 million? You might be an eligible small
    business that can write off new assets purchased for up to $20,000, rather
    than having to depreciate them over a number of years.
  • Do you have any bad debts? Write them off before 30 June to get the tax
    deduction in the current financial year.
  • Are there any staff that will be due bonuses in relation to their work in the 2016 financial year, even though they might not be paid until after 30 June? If so, let your staff know in writing before 30 June (email is fine) and you can accrue and deduct the bonus in this financial year.

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Harry Edwards
Managing Director
Bell Partners Norwest
Accountants and Advisors
P: 02 8292 9700
W: www.bellpartners.com
E: hedwards@bellpartners.com