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Federal Budget Snapshot and how it effects you – May 2016

Bag with federal budget

Scott Morrison handed down his first Federal Budget on 3 May 2016 for the 2016-2017 year.
Here is a summary of the key budget announcements as they relate to individuals and small business.

Superannuation
The Budget contained significant changes to the superannuation rules.

• Effective immediately, there will also be a new $500,000 lifetime cap on non-concessional contributions (after tax contributions).
From 1 July 2017:
• Workers earning more than $250,000 a year will pay double the rate of tax on their super contributions (15 per cent to 30 per cent).
• Caps on concessional super contributions lowered to $25,000 per year irrespective of age.
• Retirees with super balances over $1.6 million can no longer enjoy tax-free earnings on all their pension assets. While balances in excess of $1.6 million can be retained in Super they will attract 15% tax, similar to accumulation balances.
• Workers earning up to $37,000, will receive a refund of up to $500 in their super account of the amount of tax paid on their super contributions.
• If your employer isn’t allowing you the opportunity to salary sacrifice to superannuation, you’ll be allowed to claim an income tax deduction for personal superannuation contributions in your tax return.
• All individuals up to the age of 75 will be able to claim a tax deduction for personal super contributions irrespective of their employment circumstances.

Business Owners
• From the 1 July this year, small businesses will get a tax cut, 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.
The lower rate will be introduced to businesses progressively until it is applied to all businesses by 2023-24. By 2026-27, the rate for all businesses will go to 25 per cent, with the aim of making Australians companies more competitive internationally.
• The SBE (Small Business Entity) threshold will increase to $10 million in annual turnover (up from $2 million) from 1 July 2016. This will allow more business owners access to the small business concessions, including an immediate deduction for assets costing up to $20,000 and the ability to account for GST on a cash basis.

Income Tax
• The income threshold for the middle income tax bracket, will be lifted from $80,000-$87,000. This translates to $6.04 per week or $315 per annum.
• From 1 July 2017, the 2 per cent Budget Repair Levy will be removed, reducing the top tax rate from 49% to 47%.

More Information
For all the Federal Budget’s key initiatives, visit the Federal Government budget website at Federal Budget 2016-2017
If you have any questions after reading this please contact your TAG Financial Services adviser on (03) 9886 0800 or via email.

 

 

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