This Bill will implement the 2015 Budget proposals to provide accelerated depreciation for small businesses and primary producers.

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This Bill will amend the Income Tax Rates Act 1986 to reduce the company tax rate from 30% to 28.5% for companies that are small business entities with an aggregated turnover of less than $2 million.

A number of consequential amendments are made to various provisions in the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 that refer to a 30% rate to ensure that the appropriate rate is applied for small business companies.

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With Medicare Levy included, the top marginal rate would be 49% from 1 July 2015 to 30 June 2017.

CHANGE TO SMALL BUSINESS TAX RATE – Date of effect – 1 July 2015
The tax rate for companies with an aggregated annual turnover of less than $2m will be reduced by 1.5%
from the 2015/16 income year. From 1 July 2015, the company tax rate applying to small businesses with
turnover less than $2m, will fall from the current rate of 30% to 28.5%.

Companies with an aggregated annual turnover of $2m or above will continue to be subject to the current
30% rate on all their taxable income. The current maximum franking credit rate for a distribution will
remain unchanged at 30% for all companies.

As the tax cut will apply from 1 July 2015, companies with PAYG instalments can benefit from their first
payment after 1 July 2015.

From the 2015/16 income year, small business taxpayers with business income not generated through a
company will be eligible for a tax discount of 5% of the income tax payable on their business income,
capped at $1,000 per individual for each income year. The taxpayer will calculate their business and
personal income in the same way, but receive a 5% discount on tax payable on their business income,
claimed as a tax offset through their end-of-year tax return.

SMALL BUSINESS ACCELERATED WRITE OFF - Date of effect – 7.30pm, 12 May 2015 up to 30 June 2017

Small businesses who previously claimed a deduction for new assets over several years will now be able
to deduct in full expenditure on new depreciable assets costing less than $20,000, irrespective of the
number of new assets they purchase, from 7:30pm on budget night up to 30 June 2017.

Assets valued at more than $20,000 can be added together (“pooled”) and depreciated at the same rate
which is 15% in the first income year, and 30% a year thereafter. When the value of the pool falls below
$20,000, it can be immediately deducted, until the end of June 2017.

The rules preventing small businesses from re?entering the simplified depreciation regime for five years
after opting not to use it will also be temporarily suspended.

IMMEDIATE DEDUCTION FOR BUSINESS ESTABLISHMENT COSTS - Date of effect – 1 July 2016
New companies will no longer have to wait for five years before writing off start-up “professional costs”.
Many people need the advice of lawyers and accountants when they start a business.

An immediate deduction will be available for professional expenses that are associated with starting a
new business, such as professional, legal and accounting advice or legal expenses to establish a company,
trust or partnership.

The deduction will be available to start-up businesses from the 2015/16 income year.

Currently, such expenses are deductible over five years under s 40-880 of the Income Tax Assessment
Act 1997, the “blackhole” expenditure provision.

WORK RELATED MOTOR VEHICLE DEDUCTIONS - Date of effect – 1 July 2015
Two of the four motor vehicle expense claim methods will be removed, being the ‘12% of cost method’
and the ‘one-third of actual expenses’ method. Individuals will need to use either the ‘cents per kilometre
method’ or the ‘logbook method’.

The cents per kilometre method (typically used by individuals who drive less than 5,000 business
kilometres per year) currently has three different rates depending on the engine size of the motor vehicle.
These rates will be replaced by a single rate of $0.66 per kilometre that will apply to all motor vehicles,
regardless of engine size.

MEDICARE LEVY THRESHOLDS FOR FAMILIES INCREASED – Date of effect – 1 July 2014
From the 2014-15 income tax year, the Medicare Levy low income thresholds will be increased by $894
to $35,261.

The additional amount of threshold for each dependent child or student will increase from $3,156 to
$3,238 for 2014-15.

The Medicare Levy low income threshold for individuals will increase by $351 to $20,896.

The Senior Australians Medicare Levy low income threshold will increase to $33,044, up from $32,279.
This threshold applies to those entitled to the seniors and pensioner tax offset.

TEMPORARY WORKING HOLIDAY MAKERS – TAX RESIDENCY RULES TO CHANGE – Date of effect – 1 July 2016
The tax residency rules will change to treat most people who are temporarily in Australia for a working
holiday as non-residents for tax purposes, regardless of how long they are here. This means that they will
be taxed at 32.5% from their first dollar of income.

Currently, if they satisfy the tax residency rules, which generally means that they are in Australia for
more than six months, they will qualify for the tax-free threshold of $18,200 before they are taxed.

HELP DEBT – OVERSEAS STUDENT PAYMENT OBLIGATIONS – Date of effect – 1 July 2017
New arrangements will apply from 1 January 2016 requiring Australians residing overseas to repay their
HELP debt. The arrangements will apply to both new and existing debts. From this date, debtors going
overseas for more than six months will be required to register with the ATO, while those already overseas
will have until 1 July 2017 to register.

Only those graduates living overseas and earning incomes above the minimum HELP repayment
threshold (AUD$53,345 in 2014-2015) will be required to make repayments.

Repayment obligations will commence form 1 July 2017, for income earned in the 2016-2017 financial
year.

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Concessional contributions cap

These include:

• employer contributions (including those under a salary sacrifice arrangement); and
• personal contributions claimed as a tax deduction by a self-employed person.

The amount of the cap will be increased from $25,000 in 2013/14 to $30,000 in 2014/15.

Non-concessional contributions cap
Non-concessional contributions include personal contributions for which taxpayers do not claim an income tax deduction.

The amount of the cap will be increased from $150,000 in 2013/14 to $180,000 in 2014/15.

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–          The instant asset write-off amount of $6,500 for small businesses – from 1 January 2014, the instant asset write-off will be reduced back to $1,000;

–          The accelerated deprecation for motor vehicles that is available to small businesses – from 1 January 2014, this will no longer be available;

–          The loss carry-back measure – this measure will only apply for the 2013 income year;

–          The Schoolkids’ Bonus will no longer be available;

–          The increase to the superannuation guarantee charge percentage will be deferred by 2 years so that it remains at 9.25% for the 2014, 2015 and 2016 income years. See the table below for the proposed rate increases over the coming year:

The Government will also not proceed with the following personal income tax cuts which were to commence on 1 July 2015:

–          Further increase in the tax-free threshold from $18,200 to $19,400;

–          Increase the income tax rate to 33% (from 32.5%) for the income bracket $37,001 – $80,000;

–          Change to the low income superannuation contribution as it will no longer be available.

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CGT Discount for NON-RESIDENTS abolished

• The 50% CGT discount for non-residents will be abolished for capital gains.
• The CGT discount will remain available for capital gains accrued prior to this time where non-residents choose to obtain a market valuation of assets as at 8 May 2012.
• Date of effect – will apply to capital gains accrued after 7.30pm (AEST) on 8 May 2012.

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Deffering Income

• Income received in advance of services to be provided will generally not be assessable until the services are provided.
• Taxpayers who provide professional services may consider, in consultation with their clients, rendering accounts after 30 June to defer the income.
• A taxpayer is required to calculate the balancing adjustment amount resulting from the disposal of a depreciating asset. If the disposal of an asset will result in assessable income, you may want to consider postponing the disposal to the following income year.

Claim all work-related deductions

• Claiming all your work-related deduction (e.g. uniforms, employment-related telephone, mobile and internet costs, subscriptions, home office expenses and union fees) entitlements may save considerable tax. In doing so check whether you have all the necessary receipts or credit card statements.
• Where you don’t have the necessary receipts on hand you can still claim up to $300 of work-related expenses provided the claims relate to outgoings you necessarily incurred in doing your job.
• A deduction for laundry costs is allowable where the relevant clothing is protective clothing, a compulsory uniform, an approved non-compulsory uniform or certain occupation-specific clothing. Moreover, laundry claims of up to $150 do not have to be substantiated even if your total income tax deductions exceed $300.

Deduct home office expenses

• When part of your home has been set aside primarily or exclusively for the purpose of doing work from home costs such as heating, cooling and lighting and depreciating your office equipment or professional library may be allowable. To claim the deduction you must have typically kept a diary for at least 4 weeks of the hours you worked at home. This amount is then used to work out your total hours worked for the year and a deduction claimed at a current rate of $0.34 cents per hour. However, no deduction is available for occupancy expenses such as mortgage interest, rent, and insurance and rates unless you conduct a business from your home.

List your rental property deductions

• Landlords can claim deductions for a range of expenses such as advertising, bank charges, body corporate fees, cleaning, council rates, electricity and gas, gardening, insurance, loan interest, land tax, lease preparation expenses, legal costs, pest control, postage and stationery, property agent fees and commissions, repairs, secretarial and bookkeeping fees, telephone charges and water rates. You may also be able to write off the cost of certain buildings, depreciating assets and borrowing costs over time.

Claim income protection insurance

• The ATO allows you to claim income protection insurance as a work-related expense. It is insurance worth considering for anyone in the workforce as it pays a portion of your salary for a while if you’re temporarily unable to work because of sickness or injury.

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Personal tax rates

The income tax thresholds and tax rates for residents (excluding the 1.5% Medicare levy) are:

Increase to Medicare low-income thresholds

• The Medicare levy low-income thresholds will be increased to: $20,542 for individuals and $33,693 for members of a family
• The additional amount of threshold for each dependent child or student will also increase to $3,007. The increase in these thresholds ensures that low income families and individuals are not liable to pay the Medicare levy.
• The Medicare levy threshold for pensioners below Age Pension age will increase to $32,279. This increase will ensure that pensioners below Age Pension age do not pay the Medicare levy when they do not have an income tax liability.
• Date of effect – 1 July 2012

Medical expenses tax offset

• A 20% tax offset generally applies for eligible net medical expenses over an indexed threshold $2,120 for 2012-13 ($2,162 for 2013-14).
• For people with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012-13), the threshold above which a taxpayer may claim the NMETO will be increased to $5,000. Further, the rate of reimbursement will be reduced to 10% for eligible out of pocket expenses incurred.

Superannuation guarantee rate increase

• The superannuation guarantee rate will progressively increase from 9% to 12%, from 1 July 2013 to 1 July 2019.
• 2003-13: 9%     2013-14: 9.25%     2014-15: 9.5%     2015-16:10%
• The maximum age limit for the superannuation guarantee, currently 70 years, will be abolished.
• Date of effect – 1 July 2013

Superannuation – Concessional contributions

• The 2010-11 Budget measure allowing individuals aged 50 and over with total superannuation balances below $500,000 to contribute up to $50,000 per year in concessional contributions will be deferred for two years from 1 July 2012 to 1 July 2014.
• This means that for the 2013 and 2014 financial years, the maximum concessional (deductible) contribution that can be made by any individual, regardless of age, is $25,000.
• Date of effect – 1 July 2012

Increase tax rate for concessional contributions for high income earners

• Currently, a 15% flat tax rate applies to concessional superannuation contributions. From 1 July 2012, individuals with an income greater than $300,000 will have their contributions taxed at the rate of 30%.
• The definition of “income” for this purpose will include concessional superannuation contributions. If an individual’s income excluding their concessional contributions is less than $300,000, but the addition of their concessional contribution raises them above this threshold, the 30% tax rate will only apply to that part of the contribution in excess of $300,000.
• The higher tax rate will not apply to concessional contributions that exceed the concessional contributions cap, as these are already taxed at marginal rates.
• Date of effect – 1 July 2012

Electronic refunds

• Individual tax returns with an estimated refund will require Australian bank account information including BSB, account number and name to be entered when lodging electronically.

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