The 2016 Federal Budget included many changes, some quite substantial, in areas such as tax, superannuation and training to encourage youth employment. Here is a summary of some of those critical elements that will have an impact on small and medium enterprises and businesses working within the motor trades and automotive industry.
Business Package: Ten-year enterprise tax plan
From 1 July this year, the small business tax rate will be lowered to 27.5 per cent and the turnover threshold for small businesses able to access it will be increased from $2 million to $10 million. This will effect up to 60,000 businesses which employ some 1.5 million Australians.
Including the reduction (from 28.5 per cent to 27.5 per cent) for businesses with turnover of less than $2 million, more than 870,000 businesses, employing 3.4 million Australians, will have their tax reduced.
The turnover threshold for access to the lower company tax rate of 27.5 per cent will be increased over four years, from $10 million to $25 million in 2017-18, to $50 million in 2018-19 and $100 million in 2019-20.
The government says that by 2020, more than half of all employees in Australia – around 4.9 million people – will be working at companies paying the lower tax rate of 27.5 per cent.
The unincorporated small business tax discount is to be increased from 5 per cent to 8 per cent and the turnover threshold extended from $2 million to less than $5 million.
From 1 July 2016, access to instant write-off for equipment purchases of up to $20,000 will be extended to businesses with a turnover of less than $10 million. The tax break is due to expire on 30 June 2017.
Phase two of the ten-year enterprise tax plan will extend the lower tax rate of 27.5 per cent to all businesses by continuing to step up the threshold each year until 2023-24. The Government says the tax rate will then fall to 25 per cent in 2026-27.
From 1 July this year, the upper limit for the middle income tax bracket rises from $80,000 to $87,000 per year.
The Government will establish a tax avoidance taskforce of more than 1,000 specialist staff within the ATO to police and ensure companies, multinationals and high wealth individuals pay the correct amount of tax. These measures are expected to raise an additional $3.9 billion in revenue over the next four years.
The luxury car tax is expected to return $580 million in 2016-17.
From 1 July 2017, access to superannuation tax concessions for the wealthiest will be reduced by:
- introducing a transfer balance cap of $1.6 million on amounts moving into the tax-free retirement phase, with balances able to increase above this cap, on account of tax free earnings, once transferred;
- extending the 30 per cent tax on concessional contributions to those earning over $250,000;
- reducing the annual cap on concessional superannuation contributions to $25,000; and
- from tonight, establishing a lifetime non-concessional contributions cap of $500,000.
A Low Income Superannuation Tax Offset from 1 July 2017 will be introduced to ensure that people earning less than $37,000 are not paying more tax on their superannuation than they are on their income.
Flexibility and choice in superannuation will be increased to support how people work and save.
Part of a $50 billion national infrastructure plan:
- $594 million in additional equity to the Australian Rail Track Corporation for land acquisition and the continuation of pre-construction works and due diligence activities
- $2 billion Water Infrastructure Loan Facility for new investment in dams and pipelines across Australia, building on the existing National Water Infrastructure Development Fund and the Northern Australia Infrastructure Facility.
- Funding for 180 other major projects under construction or in the pre-construction stage, including upgrades to the Bruce Highway and Ipswich Motorway.
The Government is to introduce an $840 million Youth Employment Package called Young Jobs PaTH (Prepare, Trial, Hire). to assist job-seekers gain new skills and experience that will help them join the workforce.
Commencing in April 2017, young job seekers will be able to undertake comprehensive skills training to prepare them for the workplace. Job seekers will have to register with jobactive – the government body designed to connect employers and job seekers – and training will take place within five months of signing up.
In stage two, the Government will introduce an internship program with up to 120,000 placements over four years to help young job seekers, who have been in employment services for six months or more, to gain valuable work experience with an operating business.
Job seekers and businesses, with the help of their jobactive providers, will be able to work together to design an internship placement of 4 to 12 weeks’ duration, during which the job seeker will work 15 to 25 hours per week.
Job seekers will receive $200 per fortnight, on top of their regular income support payment, while participating in the 1 to 3-month internship.
Businesses that take on interns will receive an upfront payment of $1,000.
In stage three, Australian employers will be eligible for a Youth Bonus wage subsidy of between $6,500 and $10,000, depending on the young person’s job readiness, while existing wage subsidies – including those for parents, Indigenous, mature age, and the long-term unemployed – will be streamlined, making them easier for employers to access.
From 1 December 2016, eligibility for the New Enterprise Incentive Scheme (NEIS) will be broadened to allow access to self-employment training and mentoring for job seekers who are not in employment, education or training and those not on income support. A total of 8,600 places will be available annually and the NEIS will provide eligible job seekers with small business accredited training, mentoring and business advice for up to 52 weeks.
Also part of the package aimed at young people is the ‘Exploring Being My Own Boss’ workshop – designed to engage job seekers to explore self employment – and Self Employment Starter Packs aimed at helping young people develop their ideas into successful businesses.
The Government says it will achieve a saving of $247 million over 5 years from 2015-16 by reducing the annual funding available under the Industry Skills Fund. Funding of $206.9 million over five years will continue to be provided to support the training needs of small and medium enterprises which cannot be readily met by the national training system.