Federal Budget 2015. The Big Winners.

The budget favours small businesses and families and is designed to promote job growth. It is aimed at restoring confidence in the economy. The SMH comments that “Rating agencies and most economists have cautiously welcomed the Abbott government's second budget saying it recommitted the government to cutting the debt and deficit without being too austere”

The big winners are small business, families and job seekers.

Small Business…

Business owners should immediately revisit their business plan and budgets as a result of the following announcements:

• Small businesses can claim an immediate tax deduction for “each and every item” purchased up to the value of $20,000. This applies from 7:30pm on 12 May, 2015 until 30 June, 2017
• From 1 July, Companies from 1 July which have an annual turnover of less than $2m will have their tax rate lowered from 30% to 28.5%
• There will be an annual 5% tax discount of up to $1,000 a year for unincorporated businesses – these are small businesses which are usually run by individuals
• Look out for an increase in the number of employee share and option arrangements as a result of their proposed tax treatment
• The GST basket has widened by the Government introducing GST on internet downloads.  This is intended to capture more tax here from multinational companies. The providers of downloadable music, movies and books will no doubt pass on the 10% tax to customers

Interestingly there was nothing in the budget to specifically encourage the Big End of Town to revise their current business strategies to explore mergers or significant acquisitions.

In terms of the Family…

• A new child care subsidy, is to be implemented from 1 July 2017, based on family income ($3.5bn to be spent over five years on child care assistance)
• Families earning $65,000 or less will receive a subsidy of 85% of their child care fees (up to an hourly cap)
• The subsidy gradually tapers to 50% for families earning less than $185,000
• Families earning $185,000 or more will have a $10,000 annual cap on the total amount of assistance provided per child per year
• To be eligible for the child care subsidy, children must attend an approved child care service and meet immunisation requirements
• The subsidy will be paid directly to child care providers
• Eligibility for the child care subsidy will be determined by an activity test that aligns the hours of subsidised care with the amount of work, training or study done by parents
• ‘Nannies trial’ commencing 1 January 2016 to provide a subsidy to eligible families on incomes below $250,000 a year designed to help shift workers such as nurses, police, firefighters and ambulance officers
• Extra assistance for vulnerable children, including families experiencing temporary financial hardship
• From 1 July 2016 access to parental leave pay will be limited to individuals whose employer does not provide parental leave entitlements. In cases where individuals get less generous parental leave entitlements from their employer, the government will top up the amount paid to be equal to the full amount available under the existing scheme

You may need to consider reviewing estate planning strategies in light of the changes to the age pension eligibility…

The government has proposed changes to the age pension eligibility based on the value of assets that you hold outside the family home.

• For Couples: You qualify for a full pension with assets up to the value of $375,000 in addition to your family home.  An increase from $286,500
• The maximum value of assets you can hold and still qualify for a part pension is reduced
• For Couples: If you own your own home PLUS additional assets of less than $451,500 you will get a higher pension
• For Couples: In January 2017 if you don’t own your own home but have assets up to $699,000 you will be better off
• For Singles: If you own your own home and have additional assets of less than $289,500 you will be better off
• For Singles: If you don’t own your own home and have less than $537,000 you will be better off
• For Singles: To qualify for a full pension the value of assets you can have in addition to your family home increases from $202,000 to $250,000
• A  person with a terminal illness, with two years to live will be granted access to their superannuation benefits 12 months earlier than is currently allowed 

However we should continue to watch this space because there is a tax reform process underway.  A White Paper has been released.  A Green Paper will follow eventually

Written by Andrew Frank