2015 Post Budget and Pre Financial Year End Taxation Update.

1. www.hanrickcurran.com.au
2015 Post Budget & Pre
Financial Year End
Taxation Update
Jamie Towers
Taxation Partner
3 June 2015

2. Backdrop
2experience. new thinking
 Estimated 2015/16 deficit of -$35.1 bn
representing 2.1% of GDP
 A reduction of $6bn from 2014/15 (but an
increase of $18 bn on previous est.)
 Forecast to return to surplus in 2019/20 (as
expected last year)
 Payments remain high at 25.9% of GDP,
falling to 25.3% over the forward est.
 Concerning proportion of recurrent
expenditure, not capital investment
 Stable spending and recovery in receipts
make much of the recovery in the budget
position
 Recovery in receipts driven by employment
growth on the back of real GDP growth of:
 2.75% in 2015/16; 3.25% in 2016/17
 This leaves the budget susceptible to future
shocks
-5.00%
-3.75%
-2.50%
-1.25%
0.00%
1.25%
2.50%
3.75%
5.00%
FY
1971
FY
1975
FY
1979
FY
1983
FY
1987
FY
1991
FY
1995
FY
1999
FY
2003
FY
2007
FY
2011
FY
2015
FY
2019
Budget Balance
20.00%
21.00%
22.00%
23.00%
24.00%
25.00%
26.00%
27.00%
FY
1997
FY
2001
FY
2005
FY
2009
FY
2013
FY
2017
Payments & Receipts
Receipts Payments

3. Budget Insights
3experience. new thinking
 Small Business
 GST
 Individuals
 Year End Planning

4. Budget Insights
4experience. new thinking

5. Budget Insights
5experience. new thinking

6. Budget Insights
6experience. new thinking
 Very little for non-small business
 Tax Discussion Paper released in March – little
substance
 Green ‘ideas paper’ to be released later this year
 White Paper with policies to take to next election –
due 2016

7. Small Business
7experience. new thinking
Definition of “small” business:
 Aggregated turnover of less than $2 Million (when
aggregated with other businesses under same
control)
 Turnover test applies to current or previous year
 $2 Million threshold has been in place since at least
2001 with no indexation. Time to change?

8. Small Business
8experience. new thinking
1.5% Company Tax Cut to 28.5% from 1/7/2015

9. Small Business
9experience. new thinking
1.5% Company Tax Cut to 28.5% from 1/7/2015
 Franking % to remain at 30%
 Will result in some unfranked dividends

10. Small Business
10experience. new thinking
Unincorporated Small Business Discount
 5% discount on Business income in unincorporated
entities flowing to individuals
 Capped at $1,000 per individual

11. Small Business
11experience. new thinking
Unincorporated Small Business Discount
Example:
Family business in family trust earns $80,000 of
business income and distributes to Jack.
Jack’s normal tax on $80,000 would be $17,534.
Jack receives a tax offset providing a 5% discount of
$876, meaning net tax payable of $16,658.

12. Small Business
12experience. new thinking
<$20,000 Small Business Asset Write-off
 Previously been as high as $6,500 under previous
Government (Carbon Tax Initiative) but reverted
back to $1,000 last year
 Any individual assets purchased with a value less
than $20,000 (+ GST)?
 Deduction available in year asset is first used or
installed ready for use
 Applies from Budget night until 30 June 2017

13. Small Business
13experience. new thinking
<$20,000 Small Business Asset Write-off
 Excluded Assets – Horticultural plants, Capital
Works; Assets allocated to Pools (ie software
depreciation pool), assets under lease – Financing
Impact!
 Primary Production assets – can choose write-off or
specific primary production rules
 Assets Exceeding $20,000 get a 30% write-off (15%
first year)

14. Small Business
14experience. new thinking
<$20,000 Small Business Asset Write-off
 Caution!
 ATO Will be closely monitoring new ABN
applications and will likely create an audit program
for contractors (who are otherwise just employees)

15. Small Business
15experience. new thinking
Immediate Deduction for Professional Expenses to
establish a business
 Current rules provide write-off of business set up
costs over 5 years
 From 1/7/2015 – immediately deductible

16. Small Business
16experience. new thinking
CGT Relief for Change to Entity Structure (from 1/7/2016)
 Currently roll-over relief only available for restructure
into a company
 Will allow changes to any structure
 Silent on treatment of revenue assets
 Stamp (Transfer Duty) still applies in most States

17. Small Business
17experience. new thinking
FBT Exemption - Portable Electronic Devices
 Current rules – FBT exemption for the first device
only each year where devices have ‘substantially
identical features’

18. Small Business
18experience. new thinking
FBT Exemption - Portable Electronic Devices
 ipad and iphone have similar features
 Tablets and Laptops have similar features
 Small business will be able to provide more than 1
device without being subject to FBT
 Still a real issue for other businesses

19. Small Business
19experience. new thinking
 Starting a Business to be streamlined – all
registrations in a single online portal
(business.gov.au)
 Interaction with ASIC or ATO just using ABN
 Raising funds to become simpler – Corporations Act
to be amended to allow easier access to Crowd-
source funding

20. AgriBusiness
20experience. new thinking
 Farmers able to write-off capital expenditure on
fencing and water facilities
 Write-off Fodder Storage over 3 years

21. Other Business
21experience. new thinking
 R & D - $100M Expenditure Cap
 Government still aiming for 1.5% reduction in tax
offset despite it failing to pass in an earlier bill.

22. Other Business
22experience. new thinking
Employee Share Schemes
 Rules will be fixed from 1/7/15 to ensure tax
consequences only when can sell shares to pay tax
 For some ‘small companies’ ($50 Million turnover) –
employees taxed as capital gain (incl 50% CGT
discount) rather than as ordinary income

23. Other Business
23experience. new thinking
Earn-Out Rules
 Further exposure draft legislation introduced
recently
 Broad intent to treat additional consideration under
‘look through’ earnout rights as part of main capital
gain
 Requires amendment of tax return
 No change to tax treatment of non-look though
earnout rights

24. Other Business
24experience. new thinking
 ATO – Power to fix law not operating as intended
 Power to Commissioner to issue a legislative
instrument with the effect of removing unintended
outcomes of legislation
 Commonwealth Penalty Units – up to $180 from 31
July 2015

25. GST
25experience. new thinking
 Netflix Tax – Overseas companies providing digital
content to Australian consumers will become
subject to GST (from 1/7/2017)
 Requires support of States
 Collection and its enforcement is the main problem
as no requirement for overseas business to register

26. GST
26experience. new thinking
 Reverse Charge for Going Concern and Farmland
Exemption not proceeding (policy announced last
year)
 No GST on taxable importations of < $1,000. (Again
collection is a problem)

27. CHARITIES & NOT FOR PROFITS
27experience. new thinking
 FBT Cap on ‘Meal Entertainment Expenses’
 Currently no FBT if benefits are below either a
$17,667 cap or a $31,177 cap. PLUS no FBT on any
Meal Entertainment Expenses
 From 1 April 2016 – proposed $5,000 cap on meal
entertainment. Excess counts towards other caps.
 Budget Paper indicates “all use of meal
entertainment benefits will become reportable”

28. Families
28experience. new thinking
 Paid Parental Leave Election Promise – gone!
 No Double Dipping

29. Families – Child Care
29experience. new thinking
 Current Child Care Benefit, Child Care Rebate and Jobs,
Education and Training Child Care Fee Assistance
programmes abolished. Replaced with single means
tested Child Care Subsidy
 Subject to a new activity test for up to 100 hours of
subsidised care per child per fortnight, paid directly to
approved care service providers
 Up to 24 hours per fortnight also provided where family
income < $65,000 per year, do not meet the activity test
– equivalent to two 6-hour sessions
 All subsidies will be linked to ‘no jab, no pay’ from 1
January 2016, unless exempt on medical grounds

30. Families – Child Care
30experience. new thinking
 Family Income Thresholds
 up to $65,000 the Child Care Subsidy will be 85% of
the fee (up to a benchmark price);
 will reduce to 50% for family incomes of $170,000
and above
 a cap of $10,000 per child for the total value of
subsidies for family incomes of $185,000 and above

31. Families – Child Care
31experience. new thinking
 Family Income Thresholds
Family Income Per Child Subsidy Cap
Up to $65,000 85% of fee# n/a
$65,000 - $170,000 Tapers from 85% - 50% n/a
$170,000 - $185,000 50% n/a
>$185,000 50% $10,000 pa
# % of lower of fee or benchmark price
Activity (hours
worked per fortnight) Subsidised hours (per fortnight)
8-16 up to 36
17-48 up to 72
49+ up to 100

32. Families
32experience. new thinking
 Funding linked to passage of Family Tax Benefits measures from 2014
Federal Budget (Legislation stalled in Senate)
 FTB Part B primary earner income limit will be reduced to $100,000
from $150,000
 FTB Part B payment will be limited to families whose youngest child is
under 6 years of age ( 2 year transitional arrangement for families with
the youngest child aged 6 and over on 30 June 2015)
 The FTB Part A Large Families Supplement will be limited to families
with 4 or more children.
 The FTB Part A per child add-on to the higher income free threshold
removed.
 FTB Part A payment of $750 introduced for single parents on the
maximum rate of FTB Part A whose youngest child is aged between 6
and 12 years from the point they become ineligible for FTB Part B.
 The FTB Part A and Part B end-of-year supplements will return to the
original amounts of $600pa for each FTB Part A child and $300pa for
each FTB Part B family and will cease indexation.

33. Individuals
33experience. new thinking
 Maybe a tax cut?
 Tax cuts legislated from Labor Government
 Bill to repeal not yet passed
 (only effects low income individuals – no real
change above $80,000 of income)

34. Individuals
34experience. new thinking
2012/13 2015/16 Legislated 2015/16 New
Tax Threshold Rate Threshold Rate Threshold Rate
Thresholds
1 18,201 19% 19,401 19% 18,201 19%
2 37,001 32.5% 37,001 33% 37,001 32.5%
3 80,001 37% 80,001 37% 80,001 37%
4 180,001 45% 180,001 45% 180,001 45%
Low Income
Tax Offset
(LITO) $445
#1.5%
above
$37,000 $300
#1%
above
$37,000 $445
#1.5%
above
$37,000
Effective tax
free
threshold 20,542 20,979 20,542
# Rate at which LITO reduced above threshold

35. Individuals
35experience. new thinking
 HELP Debts – repayments apply to overseas debtors
 If live overseas for > 6 months and have worldwide
income above HELP repayment threshold ($54,126 -
2016), then required to register with ATO and make
repayments from 1/7/2017

36. Year End Planning
36experience. new thinking
 If possible – Defer income until next financial year
 Bring forward expenditure
 Review & write-off bad debts
 Make super contributions before 30 June 2015
 Prepayments are effective for individuals and small
business
 Interest on Investment Loans
 Business Expenses

37. Year End Planning
37experience. new thinking
 Take the benefit of the $20,000 asset write-off
 For assets costing > $20,000 buy before 30 June as
still get 15% depreciation even if held for 1 day
 (eg – purchase a car for $50,000 on 30 June 2015.
you add it to the small business pool and get a
$7,500 depreciation deduction for 1 day)

38. Year End Planning
38experience. new thinking
If you are able to income split, take into account:
 Top Marginal Tax Rate - $180,000
 Superannuation (Division 293) tax - $300,000
 HELP repayment – 2014/15 - $53,345

39. Year End Planning
39experience. new thinking
 Trust Distributions – Check Trust deed for
distribution resolution requirements
 Ensure the trustee makes an income resolution and
records in writing on or before 30 June 2015 (or
other earlier date specified in deed)
 If any Division 7A loans from private companies –
ensure you have made minimum repayments and
charged interest

40. Ultimate Tax Deduction
4experience. new thinking
 Give the gift that keeps on giving
 Donations over $2 to Deductible Gift Recipients
allow you to FEEL GOOD about helping the chosen
charity AND you get to reduce your tax.
 Hanrick Curran assists many fantastic charities – see
details on our website

41. Disclaimers
This document contains information in summary form and discusses proposed but not
legislated rules and is therefore intended for general guidance only.
It is not intended to be a substitute for detailed research or the exercise of professional
judgement. It does not purport to be comprehensive or to render professional advice.
The reader should not act on the basis of any matter contained in this publication
without first obtaining specific professional advice.
We believe that the statements made by us in this document are accurate but no
warranty of accuracy or reliability is given. Our conclusions are based on
interpretations of accounting standards and other relevant professional
pronouncements and legislation current as at the date of this document. Should the
interpretations, accounting standards, other relevant professional pronouncements or
legislation change, our conclusions may not be valid.
© Hanrick Curran, June 2015
All rights reserved