The 2016 Budget - Tax Measures
From 1 July 2016, marginal tax rates for resident taxpayers are proposed to changeSource: AMP TapIn$80,000 marginal tax rate band increased to $87,000.
From 1 July 2016, the Government will increase the 32.5 per cent personal income tax threshold from $80,000 to $87,000 . This measure will reduce the marginal rate of tax on incomes between $80,000 and $87,000 from 37 per cent to 32.5 per cent, preventing around 500,000 taxpayers facing the 37 per cent marginal tax rate. This represents a saving of $315 or $6.05 per week.Increasing the Medicare levy low-income thresholds
The Government will increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners from the 2015-16 income year. The increases take account of movements in the Consumer Price Index so that low income taxpayers generally continue to be exempted from paying the Medicare levy.
The threshold for singles will be increased to $21,335. For couples with no children, the threshold will be increased to $36,001 and the additional amount of threshold for each dependent child or student will be increased to $3,306. For single seniors and pensioners, the threshold will be increased to $33,738. For senior and pensioner couples with no children, the threshold will be increased to $46,966 and the additional amount of threshold for each dependent child or student will be increased to $3,306.Increase in small business entity turnover thresholds
Starting from 1 July 2016, the Government proposes to increase the small business annual aggregated turnover threshold from $2 million to $10 million for certain small business concessions. From 1 July 2016 these small business concessions include: − the lowering of the small business corporate tax rate (see below), − for all businesses with annual aggregated turnover of less than $10 million simplified asset depreciation rules, including immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017, and − other tax concessions such as the extension of the FBT exemption for work-related portable electronic devices and the immediate deduction of professional expenses. Observation: • The current $2 million turnover threshold, or alternative $6 million net asset value test, will be retained for access to the small business Capital Gains Tax concessions. Lowering the company tax rate to 25 per cent
From 1 July 2016 the Government proposes to reduce the company tax rate to 25 per cent by 2026-27. Initially, the tax rate for companies with an annual aggregated turnover of less than $10 million will be reduced to 27.5 per cent from 1 July 2016. Franking credits will be able to be distributed in line with the rate of tax paid by the company making the distribution. Unincorporated small business tax discount
From 1 July 2016, for small businesses, that are not companies, the Government proposes to extend the unincorporated small business tax discount. From 2016-17, the discount will be available to business with aggregated annual turnover of less than $5 million, up from the current threshold of $2 million. The discount on tax payable on business income will be increased to 8 per cent, up from the current 5 per cent, but the maximum discount available will remain at $1,000 per annum. Over the next decade it is proposed to further expand the discount in phases to a final discount of 16 per cent, with the existing $1,000 maximum discount per individual for each income year to remain.Targeted amendments to Division 7A
The Government will make targeted amendments to improve the operation and administration of Division 7A of the Income Tax Assessment Act 1936(an integrity rule for closely held groups).
These changes will provide clearer rules for taxpayers and assist in easing their compliance burden while maintaining the overall integrity and policy intent of Division 7A. It includes a self-correction mechanism for inadvertent breaches of Division 7A, appropriate safe-harbour rules to provide certainty, simplified Division 7A loan arrangements and a number of technical adjustments to improve the operation of Division 7A and provide increased certainty for taxpayers.