Federal Budget 2016

 

CCIQ Director of Advocacy Nick Behrens said measures announced tonight by Treasurer Scott Morrison in his first Budget were immediately encouraging for small business.

Here's what it means for your business.

Tax Reform

Ten Year Enterprise Tax Plan 

Company tax reductions

  • Company tax cut to 27.5 per cent for all small companies with annual turnover of up to $10m from July 1, 2016 (threshold increased from $2 million)
  • Over next 10 years progressively apply the lower tax rate to all companies and then reduce the rate for all to 25 per cent  by July 1, 2026
  • Eligibility threshold will increase every year until 2023-24, with all businesses paying 27.5 per cent
  • The rate will drop to 25 per cent by 2026-27
  • The Plan will be legislated to provide investor certainty
  • Will cost $2.65 billion over four years

Unincorporated tax discount

  • The unincorporated tax discount will be extended to businesses with an annual turnover of less than $5 million and will increase the discount to 8 per cent (from last years’ 5 per cent) capped at $1,000
  • This will increase to 16 per cent by 2026-27 and will expand progressively to include all small businesses with annual turnover less than $5 million
  • Will cost $450 million over four years

Small business threshold

  • From July 1 2016 the small business threshold will be raised from $2 million to $10 million turnover, providing more businesses with access to benefits such as accelerated depreciation for eligible equipment
  • Will cost $2.18 billion over four years

Personal income tax

  • Raise the upper band of the middle tax bracket threshold of 32.5 per cent from $80,000 to $87,000.
  • Prevents 500,000 taxpayers being pushed into 37 per cent tax bracket
  • Will cost $3.95 billion over four years

Queensland Infrastructure

  • $200 million upgrading the first stage of the Ipswich Motorway
  • No other new infrastructure announcements for Queensland in 2016-17 Budget

Establishment of the Northern Australia Infrastructure Facility

  • $43.8 million over five years (including $11.7 million in 2020‑21) to establish the Northern Australia Infrastructure Facility (NAIF) to support economic infrastructure in northern Australia

Innovation

  • Backing co-investment and new spin-offs through the CSIRO
  • An additional $18.8 million over five years will allow the Government’s Digital Transformation Office (DTO) to create a Digital Marketplace to make it easier for small and medium enterprises and startups to deliver digital services to government, helping to support Australian innovators and entrepreneurs.
  • Development of crowd-sourced equity funding. This will expand financing options for innovative businesses, allowing funds to be raised from a large number of small investors.
  • Improving bankruptcy and insolvency laws to reduce the stigma associated with failure and foster enterprise innovation in Australia. This will strike a better balance between encouraging entrepreneurship and protecting creditors.
  • Increasing access to company losses through improvements to the tax system. This means that entrepreneurs and loss-making startups are encouraged to remain agile and seek out new opportunities to innovate and grow.

Young Job Seekers

Youth JobsPATH Initiative

  • $840 million investment over four years  in a Youth Employment Package to encourage up to 120,000 young people secure jobs
  • Vulnerable job seekers will be provided job readiness training and placed in businesses for work experience internships for 4-12 weeks, receiving an extra $200 per fortnight payment
  • Wage subsidy gives employers $6,500 and $10,000 for taking on young job seekers

Start-up assistance

  • An extra $88.6 million in supporting job seekers who wish to start their own business. 
  • Access to self-employment training and mentoring for job seekers broadened to include those not on income support.

Other

Tobacco Excise

  • The Government will raise an extra $4.7 billion over forward estimates, four annual increases of 12.5 per cent each year until 2020.

Multinational tax avoidance

  • The government has estimated that it will raise $3.7 billion over four years from greater enforcement targeted predominately at multi-nationals.
  • Diverted profits tax: The Government will impose a 40 per cent penalty on multinational corporations that attempt to shift their Australian profits offshore.
  • This is expected to raise $650 million over four years.

Here's the devil in the detail

Budget Table 1

The Budget sets out the Governments strategy to forge a path back towards surplus with the fiscal deficit projected to shrink from $39.4 billion in 2015-16 to $2.1 billion by 2019-20.

The Fiscal balance deficit will shrink as a percentage of GDP from 2.4 per cent in 2015-16 to 0.1 per cent in 2019-20.

Budget 2

 

Real GDP is projected to grow from 2.5 per cent in 2015-16 to 3 per cent over the outer years of the budgetary projections.
Employment is set to moderate with the strong growth recorded of 2 per cent in 2015-16 to fall to 1.5 per cent by 2019-20.
 The unemployment rate is projected to fall from 5.75 per cent in 2015-16 to 5.5 per cent from 2016-17 onwards.
The national inflation rate is expected to strengthen over the next four years from an anaemic 1.25 per cent in 2015-16 to 2.5 per cent by 2019-20.
Wages are expected to rise over the forward estimates from 2.25 per cent in 2015-16 to 3.5 per cent in 2019-20.
Nominal GDP is also expected to grow from 2.5 at present to 4.25 per cent in 2016-17, and then 5 per cent over the projection outer years.  

Budget3

 

Revenue is expected to rise across the forward estimates from 24 per cent of GDP in 2015-16 to 25.9 per cent in 2019-20.
Expenses will marginally fall over this period from 26.1 per cent in 2015-16 to 25.7 per cent in 2019-20.
Pleasingly, net capital investment will increase from 4.4 per cent in 2015-16 to 5.5 per cent in 2019-20.

budget5

  1.  

Net debt as a percentage of GDP is forecast to moderate over the forward estimates from 17.3 per cent in 2015-16 to 17.8 per cent in 2019-20.
Positively, net interest payments are expected to hold steady at 0.7 per cent of GDP by 2019-20.