By Andrew Hayes, Director, Westlawn Business Services 14 May 2014
In a Budget intended to reduce the deficit from its current $49.9 billion to $29.8 billion next year, the Treasurer said that he was “delivering balanced and credible budget repair”.
Among the measures announced, a Temporary Budget Repair Levy of 2% will be payable on taxable incomes over $180,000 pa for the next three financial years. There’ll also be changes to the Family Tax Benefit while the Dependent Spouse and Mature Age Worker Tax Offsets will be abolished from 1 July 2014.
Here are the Budget changes that could impact your business.
FBT tax rate impacted by deficit levy
The Treasurer said that in order to prevent high-income earners from utilising fringe benefits to avoid the 2% deficit levy, the FBT rate will be increased from 47% to 49% from 1 April 2015 until 31 March 2017. The cash value of benefits received by employees of public benevolent institutions and health promotion charities, public and not-for-profit hospitals, public ambulance services and certain other tax-exempt entities will be protected by increasing the annual FBT caps. In addition, the fringe benefits rebate rate will be aligned with the FBT rate from 1 April 2015.
Reduction in company tax rate
The Government confirmed that it was committed to cutting the company tax rate by 1.5 percentage points (to 28.5%) from 1 July 2015. For large companies, the reduction will offset the cost of the Government’s 1.5% Paid Parental Leave levy.
Reduction in R&D offset rates
The rates of the refundable and non-refundable research and development (R&D) tax offsets will be reduced by 1.5 percentage points with effect from 1 July 2014. This means that the refundable offset will be reduced to 43.5% and the non-refundable offset will be reduced to 38.5%.
Employee share scheme reform on hold
Many had expected the Treasurer to announce long-awaited changes to simplify the application of the employee share scheme rules. However, the Budget was silent on this.
The rules, which have operated since 1 July 2009, have been repeatedly criticised as being too complex, in need of simplification and a disincentive for companies to offer their employees share plans. While it is understood that the Government is essentially receptive to the need for change, the Budget did not provide any welcome news in this area.
Option to withdraw excess non-concessional contributions
The Government will give individuals the option of withdrawing excess non-concessional contributions made from 1 July 2013 and any associated earnings, with those earnings to be taxed at the individual’s marginal tax rate. (Non-concessional contributions notably include non-deductible personal contributions made from a member’s after-tax income.)
Currently, superannuation contributions that exceed the non-concessional contributions cap are taxed punitively at 46.5%. The proposed new measure will bring the tax treatment of excess non-concessional contributions in line with that for excess concessional contributions, for which taxpayers already have a withdrawal option.
Superannuation guarantee rate will rise to 9.5% on 1 July 2014
Instead of pausing the superannuation guarantee (SG) rate at 9.25% (as previously announced), the Government will now allow the rate to rise to 9.5% on 1 July 2014 and will leave it at this level until 30 June 2018. As such, employers are required to increase their superannuation contributions on behalf of employees to 9.5% of ordinary time earnings from 1 July 2014.
The percentage will then increase by 0.5% each year until it reaches 12% from 2022–2023, a year later than previously proposed.
New incentive for employers to hire Australians aged 50 years or over
The Treasurer announced that employers will be able to receive up to $10,000 in government assistance if they hire a job-seeker aged 50 years or over. This program will replace the Seniors Employment Incentive Payment.
Under the program, eligible employers will receive an initial $3,000 if they hire a full-time mature-age job seeker who was previously unemployed for six months and they employ that person for at least six months. The employer will then be eligible to receive further payments as the employee meets certain further service periods.
Fuel excise to rise (except for aviation fuels) – indexation to be re-established
The Government will secure funding for additional road infrastructure projects by re-introducing biannual indexation by the CPI of excise and excise-equivalent customs duty for all fuels except aviation fuels. This will commence from 1 August 2014.
The diesel fuel rebate is unchanged, meaning it will continue to apply to excise, including the excise increase.
New assistance for small businesses
The Government will establish:
The “Small Business and Family Enterprise Ombudsman” to act as a one-stop shop and a single entry point as a means for small businesses to find out about government services and programs; and
A unit in the Department of Finance to provide specialist advice on contracts and to ensure small businesses are not disadvantaged as part of Commonwealth departments’ tendering and procurement processes.
Disclaimer Westlawn Business Services Pty Ltd provides this information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.