Cruel and Nasty? Perhaps not but a Bit of a Let Down for an Election Year!
While I don't quite share this fellow's view of Scott Morrison or his budget, this one really was a bit of a let down. The biggest announcements and elector bribes are perhaps yet to come and no doubt we will hear more about those in the coming weeks as the election campaigning starts in earnest.
My biggest concern is for the changes to superannuation and how they might affect existing tax planning strategies immediately.
If you have a superannuation contribution strategy as part of your overall retirement and tax planning strategy then you MUST RECONSIDER YOUR STRATEGY to make sure you don't fall foul of the announcements made last Tuesday.
So What Does the Budget Really Mean for You?
We have summarised the key announcements below and have provided links to a more detailed commentary on each.
The small business turnover threshold is to be increased. This means more businesses will be entitled to access the small business tax concessions. These can be valuable concessions so we think this is a good thing.
The company tax rate will be progressively lowered to 25% from 30% currently, this has to be good.
In addition to the company tax rate reduction those businesses that trade through another structure will also get an increased small business tax discount. That's great but it is still capped at $1,000 per individual per year, and we don't think that's good and it sort of reduces the impact of this one.
Individuals and Super
If you earn over $80,000 you currently pay 37% on your earnings. That threshold will be raised to $87,000 meaning if you earn $85,000 you will save a whopping $270 a year. It scrapes through with a good rating but we would have liked to see something more substantial and less targeted.
The concessional contributions cap will be reduced to $25,000 for all taxpayers. This means you will only be allowed to claim tax deductions for up to $25,000. Currently you could currently claim a deduction for up to $30,000 or $35,000 if you are aged 49 and over.
Concessional contributions can be caught up. This is a good thing because you can catch up on any contributions not made in prior years and will offset some of the personal tax cost related to the reduction in the cap. There are some conditions though so talk to us to make sure you get it right.
All concessional contributions will be tax deductible. This is a good thing because this will apply to everybody irrespective of their employment circumstances to make tax effective contributions.
There are new rules that make it more attractive for low income earners to make superannuation contributions and for spouses to make contributions on their behalf.
There is a new lifetime non concessional cap for superannuation contributions. This is a very bad announcement in our view, especially since it was made effective immediately. If your current strategy to fund your super relies on using non concessional contributions then you must call us immediately on (07) 54391600.
The tax free provisions relating to Transition to Retirement Income Streams is to be removed. This will effectively tax income produced from certain assets in a super fund that are currently tax free. If you are currently in a TRIS then you should call us immediately to ensure you achieve the optimal outcome once these changes take effect.
GST Payable on Low Value Imports
Low value imports are to attract GST from 1 July 2017. This measure requires overseas suppliers to register for and remit GST to the ATO. We have some doubts about how this can be achieved and what authority the ATO will have to impose tax compliance obligations on overseas persons so this is a bit of a wait and see because it may never eventuate. We think it is generally bad because for our domestic clients then the cost of those low value imports will necessarily increase.
Need More Information and Assistance
If you want to have a chat about how these announcements may affect you or your business or how we can incorporate them into your longer term business planning? Then all you have to do is give us a call on (07) 54391600 or CLICK HERE to book an appointment with our qualified team.