As we fly through 2017 at lightening rate, we thought we’d update you on recent taxation and superannuation changes that may affect you or your business.
Small businesses get bigger:
The Treasury Laws Amendment Bill 2016 has increased the number of entities that qualify for the small business entity (SBE) concessions. In 2017 financial year the turnover threshold will be increased from $2 million to $10 million and increasing to $50 million by 2020.
SBE concessions include simplified depreciation rules such as immediate deductions for assets under $20,000, a lower tax rate for corporate entities and a tax offset for individuals, various CGT exemptions and more.
Less tax, larger offsets:
Also in the Treasury Laws Amendment Bill 2016 the government has decreased the tax rate for SBE companies. In the 2017 financial year, the corporate tax rate for small business entities will be reduced from 28.8% to 27.5%. This will be extended to all corporate entities by 2024 financial year, and then gradually reduce the corporate tax further so that by 2027 the rate will be 25% for all corporate entities.
It’s not just the companies who benefit from this bill, unincorporated small businesses will have their tax discount increased from 5% to 16% over 10 years. In 2017 financial year, the small business income tax offset will be 8% (up to a maximum of $1000).
GST on imported goods:
The government has proposed that consumers acquiring low cost goods (<$1,000) from overseas will be subject to GST from the 2018 financial year.
15% tax on working holiday employees:
From 1st January 2017 all working holiday makers (WHM) will no longer receive the tax-free threshold. The individuals now have to pay 15% tax on the first $37,000 of their income. (Xero users can access this help page to assist with any implementation queries).
As an employer, you are required to register as a WHM employer with the ATO and check that the WHM is on an eligible visa (417 or 462 visas). Delays in registering may result in a fine of $4,200. Further the 2018 Budget proposes a levy for employers of foreign workers of $1200 ($1800 for larger businesses) per year for a foreign worker plus a one off payment of $3,000.
On 23rd November 2016 the government passed a number of superannuation changes proposed in the 2016/17 Federal Budget including:
- Reduction of concessional super contributions cap
From the 1st July 2017 the concessional contributions cap has been reduced to $25,000 annually and any unused concessional cap can be carried forward from the previous 5 years (subject to their superannuation balance).
- Reduction of concessional super contributions tax threshold
From the 1st July 2017 high-income earners will now have to pay Division 293 tax on their concessional taxed contributions to super if their income is over $250,000 compared to $300,000 currently.
- Reduction of non-concessional super contributions cap
From the 1st July 2017 the annual non-concessional contributions cap has been reduced from $180,000 to $100,000 for members over 64 but under 75 years old. Members under 65 will be able to contribute up to $300,000 over a 3 year period depending on their superannuation balance.
- Transfer balance cap
From the 1st July 2017 a cap of $1.6 million has been introduced on the amount that can be transferred into super in retirement phase when earnings are tax-free.
- Deductible super contributions for self employed
From the 2018 financial year self-employed individuals no longer need to satisfy the 10% employment income rule to enable personal super contributions to be tax deductible.
- Increase income threshold for spouse super contributions
Up until 2018 financial year, if you make super contributions on behalf of your spouse with assessable income of less than $13,800 then you may be entitled to a tax offset of up to $540 per year. From 2018, the spouse’s income threshold is increased $40,000 but will also include reportable fringe benefits amount and reportable employer super contributions.
- Super guarantee rate increase
Currently the Super Guarantee contribution rate is 9.5% and will remain at that level until 2022 after which it will increase to 15% by 2026
- Co-contribution replaced with tax refund
The current government co-contribution will be repealed and replaced from 1st July 2017 with the Low Income Superannuation Tax Offset. This tax offset will be available to individuals with an adjusted taxable income of <= $37,000 where 15% of their concessional super contributions (capped at $500) will be refunded directly into their superannuation fund.