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2016 Budget: The Winners & Losers

WHAT IS THE BUDGET?

Basically, the Budget sets out the government’s spending intentions over the next four years.

This spending is set out in the Budget papers which contain economic forecasts, financial strategy, spending and revenue measures as well as management of government debt.

The Budget covers the coming financial year and a further four-year period, known as the estimates. The first two years are forecasts, the latter two are projections. WHY SHOULD I CARE? Like it or not, interested or not at all, the Budget will affect you more than you think mainly because your tax dollars go towards making it happen. Chances are if you’re not affected by a tax cut, you’ll be affected by cuts in spending, or might be paying more for your beer and wine. It’s enough to make you drink… or think twice about it. So, to make it simple, here is a list of the winners, losers and the changes that are a bit neutral…

THE WINNERS:

Small Business

Small businesses will get a tax cut from July 1 this year, with the rate reduced to 27.5 per cent. The threshold for businesses eligible for this will rise from $2 million in annual turnover to $10 million. This is a big ticket item and will affect about 870,000 businesses and about 3.4 million workers.

The lower rate will be introduced to more and more businesses progressively until it is applied to all businesses by 2023-24. By 2026-27, the rate for all businesses will go down to 25 per cent, which the Government hopes will make Australians firms more competitive internationally. The measures build on a 1.5 per cent tax cut, announced last year, for businesses making less than $2 million. The Government also has incentives available from Jan 2017 where any businesses that hire an 'eligible' young job seeker will receive between $6,500 to $10,000. Superannuation The threshold at which the additional 15% tax on certain concessional superannuation contributions will be taxed will be reduced from $300,000 to $250,000 from 1 July, 2017. From 1 July 2017, individuals with a superannuation balance less than $500,000 will be allowed to make additional pre-tax contributions where they have not reached their concessional contributions cap in previous years. The ATO In addition to combating multinationals, the Government will also seek to recover lost tax revenue by going after high-income earners and companies avoiding tax by moving profits offshore. A Tax Avoidance Taskforce of more than 1,000 specialist staff will add to the organisation's watchdog capabilities. The staff costs will come out of a $678.9 million boost in funding over the forward estimates. It comes in the wake of the high-profile leak of thousands of documents from Panama law firm Mossack Fonseca, which laid bare the tax avoidance strategies of many high-profile individuals, including Australians. Drivers In Queensland, $200 million will be provided for upgrades to the Ipswich Motorway in the state's south-east. Upper-Middle earners

By increasing the upper limit for the middle income tax bracket from $80,000-$87,000, it means savings to a salary of $86k at only $6 per week - not a big deal but we'll take it with roughly the top 25 per cent of working Australians set to benefit.

Scott Morrison put the increase in the second highest tax bracket front and centre in his budget speech pitching it squarely at 'average full-time earners'. Defence

Of interest to many of our clients the Government will grow the Defence budget to 2 per cent of GDP by 2020-21, three years earlier than originally planned. Defence will get $32.3 billion for the 2016-17 financial year.

Central to that funding will be the naval shipbuilding strategy, already announced as part of the defence white paper, which will see the construction of new submarines and patrol boats in South Australia and Western Australia.

About $1.6 billion will go toward innovation within Defence. This includes $730 million for a Next Generation Technologies Fund, which will seek to bankroll "game-changing" inventions for use by the armed forces.

Operation Okra, which sees Defence personnel deployed to Iraq and Syria to combat Islamic State, will get a significant funding boost of $363 million over the forward estimates. The Government says the need for the increase was underscored by recent attacks in Paris and Belgium.

An additional $37.9 million in funding over four years will be made available for the mental health of defence personnel. Current and former ADF members, including victims of abuse, will be able to apply for treatment without needing a formal diagnosis.

Young Job-Seekers A new initiative, the Youth Jobs Path program, will provide $752 million to get people under 25 and currently on employment benefits trained to enter the workforce. The cornerstone of this will be an internship program, from July 1 next year, that will see job seekers get hands-on work experience. About 30,000 places will be available each year, and each intern will work 15 to 25 hours per week and receive $200 a fortnight on top of their regular welfare benefits. Prospective interns will need to have been looking for a job for at least six months.

THE LOSERS:

Multinational Corporations

Firms such as Apple and Google have come in for criticism over their creative tax practices and the Government, following in the footsteps of the UK, will put in place a diverted profits tax, which will tax at a higher rate of 40 per cent profits those multinationals attempt to shift offshore. It will apply to large global companies turning over $1 billion or more. The Government hopes it will claw back $200 million in lost tax revenue over the forward estimates.

Penalties for major multinationals that do not meet requirements when it comes to disclosures to the ATO will now increase. This will apply from 2017-18, though it's unclear how much money it will raise.

Whistleblowers who bring these kinds of tax avoidance practices to light will also get greater protections from July 1 2018.

Smokers

Most of us aren't too dissappointed about this one. The country's 2.5 million smokers will be hit once again, with four annual rises of 12.5 per cent in the tobacco excise. This means that by 2020 almost 70 per cent of the cost of cigarettes will be government excise.

The Government hopes to earn $4 billion over the forward estimates.

Superannuation For those of us less than 50 years of age, the amount we can contribute to superannuation pre-tax will be reduced from $30,000 to $25,000 from 1 July 2017. Plus the amount of post-tax concessional contributions will be capped at a lifetime amount of $500,000. This is a big loss for our clients who max our their super contributions each each. Working Parents

This has left some very unhappy parents as the Government has again held off implementing the childcare subsidies, which were a major sweetener in last year's budget.

The deferral is only for a year, indicating the Government is hoping it will have more success with a new Senate in the event it is re-elected in July. University Students Full fee deregulation (allowing universities to set their own fees) is off the table, for good.

But they want to float another idea - partial deregulation. Which would allow 'premium' courses to be deregulated to compete with the international market.

What does that mean? Universities might be able to offer a couple of courses whose fees are set by demand. The Government would ask a regulatory agency like the ACCC - the Australian Competition and Consumer Commission - to make sure those fees don't become unreasonable.

The Government will continue to slash university's funding by 20%, so uni's will be looking for new ways to make money.

THE NEUTRAL TERRITORY

High-Income Earners Changes to superannuation tax concessions were a clear attempt by Scott Morrison to inject some fairness back into the budget.

High income earners are expected to be hit hard by super changes with economist John Daley expecting the measures to bring an additional $2.6 billion dollars into government coffers from the top four per cent of income earners in the 2019-20 financial year.

While those on high incomes will take a hit on their super, those on very high incomes - think the top one per cent - will have that loss more than offset by the removal of the temporary budget repair levy introduced in the 2014 budget.

This will significantly reduce the tax burden for those well into the top marginal tax bracket by bringing the top rate down two per cent to the previous level of 45 per cent (excluding the Medicare Levy).

Lower-Income Earners The Treasurer announced a Low Income Superannuation Tax Offset, which will give people with incomes up to $37,000 a refund of up to $500 in their super account of the amount of tax paid on their super contributions. This isn't new but simply a sizable increase in the threshold.

Keen-eyed observers may note the similarity to Labor's $500 super contribution scheme, which the Government failed to get repealed in the Senate. Health The major cuts to healthcare funding outline in the 2014 budget have continued to hang over negotiations between the Federal Government and the states.

Schools As with health, cuts to Gonski funding have cast a shadow over the future of public education funding.

While the Government announced an additional $1.2 billion for schools between 2018 and 2020, this falls short of the Gonski funding it promised it would match at the 2013 election. Public Broadcasters The country's two public broadcasters will see extensions of their core funding, with the ABC receiving $3.1 billion over three years.

Online Shoppers It has been coming for a while, however the budget applies GST to 'low-value' goods imported from overseas, which will affect your checkout price for online purchases. So get online and do you shopping before 30 June as you can expect to see things get a little more expensive.

NOT YET DISCLOSED: ????????

Buried deep in the budget is a reference to a list of decisions worth about $1.6 billion that are "not yet announced", and lists an undisclosed saving in 2019 of almost $2 billion.

These measures would need to be announced by the Government within 10 days of the start of the campaign, so this is a hint of things to come.

What exactly this will be remains a mystery, but with the $2 billion clawed back in 2019 more than offsetting the $1.6 billion in spending there will definitely be some winners and losers.

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2016 Budget: The Winners & Losers

WHAT IS THE BUDGET?

Basically, the Budget sets out the government’s spending intentions over the next four years.

This spending is set out in the Budget papers which contain economic forecasts, financial strategy, spending and revenue measures as well as management of government debt.

The Budget covers the coming financial year and a further four-year period, known as the estimates. The first two years are forecasts, the latter two are projections. WHY SHOULD I CARE? Like it or not, interested or not at all, the Budget will affect you more than you think mainly because your tax dollars go towards making it happen. Chances are if you’re not affected by a tax cut, you’ll be affected by cuts in spending, or might be paying more for your beer and wine. It’s enough to make you drink… or think twice about it. So, to make it simple, here is a list of the winners, losers and the changes that are a bit neutral…

THE WINNERS:

Small Business

Small businesses will get a tax cut from July 1 this year, with the rate reduced to 27.5 per cent. The threshold for businesses eligible for this will rise from $2 million in annual turnover to $10 million. This is a big ticket item and will affect about 870,000 businesses and about 3.4 million workers.

The lower rate will be introduced to more and more businesses progressively until it is applied to all businesses by 2023-24. By 2026-27, the rate for all businesses will go down to 25 per cent, which the Government hopes will make Australians firms more competitive internationally. The measures build on a 1.5 per cent tax cut, announced last year, for businesses making less than $2 million. The Government also has incentives available from Jan 2017 where any businesses that hire an 'eligible' young job seeker will receive between $6,500 to $10,000. Superannuation The threshold at which the additional 15% tax on certain concessional superannuation contributions will be taxed will be reduced from $300,000 to $250,000 from 1 July, 2017. From 1 July 2017, individuals with a superannuation balance less than $500,000 will be allowed to make additional pre-tax contributions where they have not reached their concessional contributions cap in previous years. The ATO In addition to combating multinationals, the Government will also seek to recover lost tax revenue by going after high-income earners and companies avoiding tax by moving profits offshore. A Tax Avoidance Taskforce of more than 1,000 specialist staff will add to the organisation's watchdog capabilities. The staff costs will come out of a $678.9 million boost in funding over the forward estimates. It comes in the wake of the high-profile leak of thousands of documents from Panama law firm Mossack Fonseca, which laid bare the tax avoidance strategies of many high-profile individuals, including Australians. Drivers In Queensland, $200 million will be provided for upgrades to the Ipswich Motorway in the state's south-east. Upper-Middle earners

By increasing the upper limit for the middle income tax bracket from $80,000-$87,000, it means savings to a salary of $86k at only $6 per week - not a big deal but we'll take it with roughly the top 25 per cent of working Australians set to benefit.

Scott Morrison put the increase in the second highest tax bracket front and centre in his budget speech pitching it squarely at 'average full-time earners'. Defence

Of interest to many of our clients the Government will grow the Defence budget to 2 per cent of GDP by 2020-21, three years earlier than originally planned. Defence will get $32.3 billion for the 2016-17 financial year.

Central to that funding will be the naval shipbuilding strategy, already announced as part of the defence white paper, which will see the construction of new submarines and patrol boats in South Australia and Western Australia.

About $1.6 billion will go toward innovation within Defence. This includes $730 million for a Next Generation Technologies Fund, which will seek to bankroll "game-changing" inventions for use by the armed forces.

Operation Okra, which sees Defence personnel deployed to Iraq and Syria to combat Islamic State, will get a significant funding boost of $363 million over the forward estimates. The Government says the need for the increase was underscored by recent attacks in Paris and Belgium.

An additional $37.9 million in funding over four years will be made available for the mental health of defence personnel. Current and former ADF members, including victims of abuse, will be able to apply for treatment without needing a formal diagnosis.

Young Job-Seekers A new initiative, the Youth Jobs Path program, will provide $752 million to get people under 25 and currently on employment benefits trained to enter the workforce. The cornerstone of this will be an internship program, from July 1 next year, that will see job seekers get hands-on work experience. About 30,000 places will be available each year, and each intern will work 15 to 25 hours per week and receive $200 a fortnight on top of their regular welfare benefits. Prospective interns will need to have been looking for a job for at least six months.

THE LOSERS:

Multinational Corporations

Firms such as Apple and Google have come in for criticism over their creative tax practices and the Government, following in the footsteps of the UK, will put in place a diverted profits tax, which will tax at a higher rate of 40 per cent profits those multinationals attempt to shift offshore. It will apply to large global companies turning over $1 billion or more. The Government hopes it will claw back $200 million in lost tax revenue over the forward estimates.

Penalties for major multinationals that do not meet requirements when it comes to disclosures to the ATO will now increase. This will apply from 2017-18, though it's unclear how much money it will raise.

Whistleblowers who bring these kinds of tax avoidance practices to light will also get greater protections from July 1 2018.

Smokers

Most of us aren't too dissappointed about this one. The country's 2.5 million smokers will be hit once again, with four annual rises of 12.5 per cent in the tobacco excise. This means that by 2020 almost 70 per cent of the cost of cigarettes will be government excise.

The Government hopes to earn $4 billion over the forward estimates.

Superannuation For those of us less than 50 years of age, the amount we can contribute to superannuation pre-tax will be reduced from $30,000 to $25,000 from 1 July 2017. Plus the amount of post-tax concessional contributions will be capped at a lifetime amount of $500,000. This is a big loss for our clients who max our their super contributions each each. Working Parents

This has left some very unhappy parents as the Government has again held off implementing the childcare subsidies, which were a major sweetener in last year's budget.

The deferral is only for a year, indicating the Government is hoping it will have more success with a new Senate in the event it is re-elected in July. University Students Full fee deregulation (allowing universities to set their own fees) is off the table, for good.

But they want to float another idea - partial deregulation. Which would allow 'premium' courses to be deregulated to compete with the international market.

What does that mean? Universities might be able to offer a couple of courses whose fees are set by demand. The Government would ask a regulatory agency like the ACCC - the Australian Competition and Consumer Commission - to make sure those fees don't become unreasonable.

The Government will continue to slash university's funding by 20%, so uni's will be looking for new ways to make money.

THE NEUTRAL TERRITORY

High-Income Earners Changes to superannuation tax concessions were a clear attempt by Scott Morrison to inject some fairness back into the budget.

High income earners are expected to be hit hard by super changes with economist John Daley expecting the measures to bring an additional $2.6 billion dollars into government coffers from the top four per cent of income earners in the 2019-20 financial year.

While those on high incomes will take a hit on their super, those on very high incomes - think the top one per cent - will have that loss more than offset by the removal of the temporary budget repair levy introduced in the 2014 budget.

This will significantly reduce the tax burden for those well into the top marginal tax bracket by bringing the top rate down two per cent to the previous level of 45 per cent (excluding the Medicare Levy).

Lower-Income Earners The Treasurer announced a Low Income Superannuation Tax Offset, which will give people with incomes up to $37,000 a refund of up to $500 in their super account of the amount of tax paid on their super contributions. This isn't new but simply a sizable increase in the threshold.

Keen-eyed observers may note the similarity to Labor's $500 super contribution scheme, which the Government failed to get repealed in the Senate. Health The major cuts to healthcare funding outline in the 2014 budget have continued to hang over negotiations between the Federal Government and the states.

Schools As with health, cuts to Gonski funding have cast a shadow over the future of public education funding.

While the Government announced an additional $1.2 billion for schools between 2018 and 2020, this falls short of the Gonski funding it promised it would match at the 2013 election. Public Broadcasters The country's two public broadcasters will see extensions of their core funding, with the ABC receiving $3.1 billion over three years.

Online Shoppers It has been coming for a while, however the budget applies GST to 'low-value' goods imported from overseas, which will affect your checkout price for online purchases. So get online and do you shopping before 30 June as you can expect to see things get a little more expensive.

NOT YET DISCLOSED: ????????

Buried deep in the budget is a reference to a list of decisions worth about $1.6 billion that are "not yet announced", and lists an undisclosed saving in 2019 of almost $2 billion.

These measures would need to be announced by the Government within 10 days of the start of the campaign, so this is a hint of things to come.

What exactly this will be remains a mystery, but with the $2 billion clawed back in 2019 more than offsetting the $1.6 billion in spending there will definitely be some winners and losers.

©2018 BY HM BUSINESS PARTNERS

©2018 BY HM FINANCIAL PARTNERS

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