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The most important points you need to know about the 2016 Federal Budget

Get these top insights on how you can get the best results from new tax laws and business resources.

 

Increased tax threshold to benefit business owners

From July 1 2016, the Small Business Entity (SBE) is increased the tax threshold from $2 to $10 million in annual turnover, which will give many more business owners access to small business concessions.

This includes access to the immediate deduction for assets costing up to $20,000 and the ability to account for tax on a cash basis.

 

Planning Tip:

If you fall under the current SBE threshold, you can purchase assets up to $20,000 in order to receive an immediate deduction.

It’s important to understand this is only for depreciating assets, which might include vehicles, furniture, and equipment. It doesn’t include land, software, trading stock and certain intangible assets.

You may also want to consider delaying invoicing to push income into the next financial year to keep your turnover within the current SBE threshold, and maximise your deductions.

 

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Tax rates have lowered for some middle-income earners

From 1 July 2016, the threshold at which the 37 cents marginal tax rate for individuals commences will increase from taxable incomes of $80,000 to $87,000.

 

Planning Tip:

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.

For example, if you purchase in the 2016 financial year, you’ll receive 37 cents in the dollar as a tax deduction, but if you purchase it next year you’ll only receive 32 cents.

Don’t spend just for the sake of the deduction but certainly bring forward purchases you might be making next year by pre-purchasing office supplies, technology, or pre-paying for insurance, telephone costs, 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 pre-paying up to 12 months’ interest.

 

Tax calculator pen and glasses

 

Take advantage of old superannuation concessions before July 1

For people under 50-years-old, the amount you can contribute to superannuation pre-tax will be reduced from $30,000 to $25,000 from 1 July 2017. Also, the amount of post-tax concessional contributions will be capped at a lifetime amount of $500,000.

 

Planning Tip:

Consider making a pre-tax contribution of up to $30,000 this year to take advantage of the ability to contribute to a lower tax environment in superannuation.

The threshold at which the additional 15% tax on certain concessional superannuation contributions will be reduced from $300,000 to $250,000 from 1 July 2017.

Also, if you’re earning between $250,000 and $300,000 you might want to consider maximising your superannuation contribution and take advantage of being able to contribute the extra $5,000 in the 2016 year, therefore saving 15 cents in the dollar.

 

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Benefits for people with low superannuation balances

From 1 July, individuals with a superannuation balance of less than $500,000 will be allowed to make additional pre-tax contributions.

This applies to people who have not reached their concessional contributions cap in previous years.

 

Planning Tip:

If you haven’t contributed the maximum pre-tax dollars to superannuation, it appears you’ll be able to catch this up in later years.

After 1 July 2017, when you’re ready, you might want to consider increasing your pre-tax super contributions if you’ve been contributing less.

 

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Source: Office works

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