Budget 2016

3rd May 2016

Small business gains at the expense of Superannuation.

The budget delivered by Treasurer Scott Morrison lacked spending cuts, but he looked to super to pay for tax cuts. Government over spending was put off for another day, which will give small businesses a kick and the tax cuts will eventually apply to all business bar the big 2,000. The popular instant asset write off was extended to business up to $10 million and the dreaded Deficit Levy goes.

Against this, super is hit hard and some will say the gloss and the paint has been removed. Clearly the Government is not convinced that super keeps people off pensions, despite evidence that it actually does. Why else would they build disincentive to invest? This is a setback for super, but will probably be corrected in later years.

Another positive aspect, however, was no changes to GST or Negative gearing, which both help small businesses and workers.

Overall, a disappointing budget which is not tackling the overspending both parties talk about, but given an election in a few months, not entirely unpredictable. It would have been good if more structural problems were tackled.

Key points from the budget announcement for small businesses:

Small business

  • Deficit Levy of 2.0% goes
  • Tax threshold moves from $80,000 to $87,000 at 32.5% rate giving Modest Tax assistance
  • Company tax rate dropped to 27.5% with turnover < $10 Million moving to $25 Million in 17/18, $50 Million 18/19 and $100 Million 19/20
  • Extension of the instant asset write off for business with turnover up to $10 Million
  • Unincorporated business small business discount rate from 5% to 8% for a small tax discount

Superannuation

  • Increasing super contribution tax from 15% to 30% for income greater than $250,000
  • Higher taxes on transfer balances higher than $1.6 Million
  • Concessional cap will drop from $30,000 to $25,000
  • The $180,000 non-concessional cap will be replaced with a lifetime non-concessional cap of $500,000
  • Some assistance to people under $37,000 in super


Source: Terry Murphy Accountant and former host radio show “Simple Economics”