Please click here to view the 2015 Federal Budget

Overview
The Budget has delivered a much needed boost to small business through targeted taxation measures. It is clear that
the Government is focused on the task of growing the economy by supporting small business to grow and help create
new and sustainable jobs.
The $5.5 billion Jobs and Small Business Package announced include tax cuts of 1.5% to company tax for
incorporated businesses with turnover under $2 million and a 5% tax discount, up to $1,000 a year, for other
businesses. The package also includes immediate tax deductions for asset purchases up to $20,000 until the middle
of 2017, and a reduction in red tape by ensuring all small business work-related portable electronic devices are not
classified as fringe benefits. Furthermore, small business legal entity restructures will not incur an immediate capital
gains tax liability.
The Government is still faced with the large task of returning the Budget to surplus and with the deficit forecast at $35
billion for 2015-16 the Federal Government will need to ensure the full Budget package is passed through the Senate.
Furthermore, the budget is not expected to return to surplus within the forward estimates.
Unfortunately though, despite infrastructure announcements for other States including a $5 billion concessional loan
facility for Northern Australia and a withdrawal of $1.5 billion in funding to Victoria’s East-West Link, South Australia
did not receive any new economic infrastructure funding.
Federal Budget Position
At the time of the Mid-Year Budget outlook in December 2014, the Government anticipated the underlying cash deficit
to be $40.4 billion for 2014/15, an increase of $10.6 billion from the deficit predicted in May 2014 when iron ore spot
prices were US$95 per tonne. Looking at 2015/16, the Mid-Year Budget Outlook predicted the budget deficit to decline
to $31.2 billion predicated on an iron ore price of US$60 per tonne over the following two years and real GDP growth
of 3% in 2015/16. The Mid-Year Budget Outlook recorded net debt at $244.8 billion and forecast a surplus in the
underlying cash balance by 2019/20 around the time net debt was forecast to peak at $315.8 billion.
Tonight’s Budget showed the deficit for 2014/15 will be $41.1 billion, down from $48.5 billion in 2013/14, and is
forecast to be $35.1 billion in 2015-16. Real GDP growth is now forecast at 2.75% for 2015/16 and is expected to
increase to 3.25% in 2016/17.
While the global economic recovery has been weaker than expected, all major advanced economies including the
United States, the Euro area and Japan are expected to strengthen. China’s economic growth is expected to
moderate but is still expected to be a major contributor to global growth. While the non-mining sector of Australia’s
economy only accounted for 55% of growth over the past three years that is expected to increase to 84% over the
next three years. Since the 2014/15 Budget, forecast iron ore exports have been downgraded by $90 billion, deducting
$20 billion off tax collections.
Although the budget forecasts a decline in the deficit to $6.9 billion by 2018/19, there is no commitment as to when the
budget will reach surplus within the forward estimates. Total revenue for 2015-16 is forecast to be $405.4 billion, an
increase of 5.5% on estimate revenue in 2014/15 while total expenses for 2015-16 are expected to be $434.5 billion,
an increase of 3.4% on expenses in 2014/15.
Australia’s net debt will be $250.2 billion for 2014/15, an increase of $52.3 billion from 2013/14 and is forecast to
continue rising to $325.4 billion by 2018-19.
Budget Underlying Cash Balance
Budget measures to directly impact South Australian business:
1. Business Taxes
-
All small companies with an aggregated annual turnover of less than $2 million will receive a tax cut of 1.5%,
therefore facing an effective tax rate of 28.5% from 1 July 2015. However, the current maximum franking credit
rate for a distribution will remain unchanged at 30 per cent for all companies, maintaining the existing
arrangements for investors, such as self-funded retirees.
-
All unincorporated small businesses with an aggregated annual turnover of less than $2 million will receive a 5%
tax discount of up to $1,000 per year.
-
Small business with aggregate annual turnover of less than $2 million will now be able to change the legal
structure of their business without incurring an immediate capital gains tax (CGT) liability. This measure will be
available from the 2016/17 financial year.
-
Small businesses with aggregate annual turnover of less than $2 million will be able to immediately deduct new
assets purchases costing under $20,000 between now and 30 June 2017 which is a significant increase on the
existing $1,000 threshold. Any assets over $20,000 can be added together (pooled) and depreciated at the same
rate. These assets are depreciated at 15% in the first year and 30% thereafter. The Government will also suspend
the current ‘lock out’ laws for simplified depreciation rules.
-
The Government will impose the GST on all digital products and services, including on-line TV and movie provider
Netflix, under new rules to apply to imports of so-called "intangibles" such as downloaded books, music, videos
and software raising $350 million over the forward estimates.
-
New multi-national anti tax avoidance law to stop companies which artificially avoid having a taxable presence in
Australia. Subject companies to be penalised double the tax owed plus interest.
-
A cap of $100 million on the amount of eligible research and development (R&D) expenditure for which companies
can claim a tax offset at a concessional rate has been introduced under the R&D tax incentive. Expenditure
beyond the $100 million cap will receive a lower offset at the company tax rate.
-
No lowering of GST threshold on imports which currently stands at $1,000.
2. Fringe Benefits Tax
-
Salary packing of meal and entertainment expenses, including holidays, cruises and weddings, for some
employees of not-for-profit organisations will now be subject to a $5,000 cap which is expected to save the budget
$295 million over four years.
-
All businesses with aggregate annual turnover of less than $2 million will be allowed an FBT exemption from 1
April 2016 where they provide employees with more than one work-related portable electronic devices including
mobile phones and laptops even where the items have substantially similar functions.
3. Employment Incentives
-
$18.3 million over five years from 2014-15 to vary existing unpaid work experience arrangements, allowing job
seekers to undertake up to 25 hours per week of unpaid work experience for up to four weeks where there is the
likelihood of employment as a result. The programme is for job seekers aged 18 years and over and is on a
voluntary basis. Participants will continue to receive income support and a supplement. The new work experience
programme will have a strong focus on creating opportunities for young job seekers. Employers who offer
participants ongoing employment may be eligible for a wage subsidy.
-
From 1 July 2015 the Government will establish a single wage subsidy pool with access to funding of
approximately $1.2 billion over four years, through the consolidation of four existing programmes: the Long Term
Unemployed Wage Subsidy, the Youth Subsidy, the Restart Subsidy and the Tasmanian Jobs Programme. The
Restart Subsidy, to encourage employment of workers over 50, will be more accessible by allowing employers to
receive the subsidy amount of $10,000 progressively over 12 months, rather than the current 24 months.
-
Additional changes to tax treatment of employee share schemes including;



-
excluding eligible venture capital investments from the aggregated turnover test and grouping rules (for
the start-up concession);
providing the capital gains tax discount to employee share scheme interests that are subject to the startup concession, where options are converted into shares and the resulting shares are sold within 12
months of exercise; and
allowing the Commissioner of Taxation to exercise discretion in relation to the minimum three-year holding
period where there are circumstances outside the employee’s control that make it impossible for them to
meet this criterion.
Work-related care expense deductions will be modernised by replacing the three current rates based on engine
size with one rate set at 66 cents per kilometre to apply for all motor vehicles. This is to align work related
expenses with modern vehicle outcomes, but the logbook method will still apply where more than 5,000 km are
travelled per year.
4. Business Compliance Measures
-
New start-ups will be able to immediately deduct professional advice, including legal and accounting expenses,
associated with starting a business rather than writing such expenses off over five years.
-
Business registration will be streamlined to make it easier to start a new business.
-
Import Processing Charges will be restructured to recover the cost of cargo and trade-related reform activities,
removing the differential charges for post, air and sea cargo declarations, and introducing higher charges for
manual documentary declarations. Licence charges will also be restructured for brokers, depots and warehouses,
including introducing warehouse and broker licence application charges, increasing the broker renewal charge
and introducing a warehouse licence variation charge.
-
The requirement for lawyer migration agents to be registered under the migration agents’ regulatory scheme has
been removed.
5. Trade Assistance
-
$24.6 million over two years from 2015-16 to promote business understanding of the recently concluded Free
Trade Agreements in North Asia and to assist businesses to access and maximise their benefits under these
agreements. Advocacy and outreach activities will take place in both Australia and in target offshore markets.
This funding includes Development of supporting materials and creation of a “dashboard” to assist exporters to
navigate the acknowledged complex tariff schedules and compliance arrangements. The trade dashboard will be
designed to condense the bewildering slabs of documentation that make up FTAs into a digital interface so that an
exporter can type in their product and the export destination and the system returns the best possible tariff rate.
The dashboard will also contain information on quotas and any other restrictions that apply to the export product.
As well as helping exporters get the best out of their existing exports, the dashboard will allow them to road-test
the tariffs that would apply to new products they want to research or launch into overseas markets. Crucially, it will
allow firms to compare the tariff regime they would face versus competitors from other nations that may or may
not have an agreement.
-
$18.0 million over four years from 2015-16 to Austrade to expand its current programme of Australia Week events.
The events will be held in China, India, ASEAN countries and the United States to build Australia’s reputation as a
tourism destination and as a trade and investment partner.
-
$5.2 million over four years from 2015-16 to expand the Match Australia sports business programme. Match
Australia establishes business networking events aimed at linking Australian firms with business partners by
leveraging major sporting events in Australia and overseas. The cost of this measure will be met by ceasing the
Asian Business Engagement Plan grants programme.
6. Other Business Assistance
-
The Government is making it easier for small businesses to access the capital they need to grow and thrive by
removing obstacles to crowd-sourced equity funding.
-
The Government will maintain the Automotive Transformation Scheme (ATS) in its original form as legislated
which will provide confidence to South Australia’s automotive component supply chain.
-
To encourage drought preparedness, an immediate tax deduction will be available to farmers for building water
facilities and farmers can depreciate new fodder storage assets over three years from 1 July 2016.
-
Farmers will immediately be able to deduct the cost of new fencing from 1 July 2016.
Budget measures which will indirectly impact South Australian business:
1. Infrastructure Investment
-
No new economic infrastructure projects have been funded in South Australia.
2. Public Sector Efficiencies
-
The abolition of a further 35 Government bodies, the merger of a further three bodies (for a net reduction of two)
bodies; and the replacement of one Commonwealth body with a State body.
-
A continued program of efficiency reviews of portfolio departments and major agencies. Over the next few weeks
the Government will be initiating further functional reviews of the following Government departments and major
agencies:
•
•
•
•
•
•
•
•
-
The Department of Agriculture;
The Department of the Environment;
The Department of Foreign Affairs and Trade;
The Department of the Treasury;
The Attorney-General's Department;
The Australian Taxation Office;
The Department of Social Services; and
The Australian Bureau of Statistics.
Scoping Studies to assess the optimal ownership of Government businesses and assets including Australian Rail
Track Corporation.
3. Other
-
From 1 July 2016 most people who are temporarily in Australia for a working holiday will be treated as non
residents for tax purposes, regardless of how long they are here. This means they will be taxed at 32.5 per cent
from their first dollar of income. Currently, a working holiday maker can be treated as a resident for tax purposes if
they satisfy the tax residency rules, typically that they are in Australia for more than six months. This means they
are able to access resident tax treatment, including the tax free threshold, the low income tax offset (LITO) and
the lower tax rate of 19 per cent for income above the tax free threshold up to $37,000. This measure may impact
upon businesses which employ seasonal labour.
-
From 2017 Australians living overseas will legally be required to pay their HECS and HELP debts if they have
been away for more than six months and earning more than $53 000. These changes are expected to raise more
than $140 million for the Government over 10 years.
-
The Government will provide distributions of $10 million in 2015 16 from the Medical Research Future Fund, with
more than $400 million expected to be provided to researchers in the next four years. This is positive news for
South Australia which is well placed to benefit from the recently opened South Australian Health & Medical
Research Institute (SAHMRI).
-
The Government has not introduced its proposed bank deposits levy.