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Federal Budget 2015-16

PERSONAL TAX RATES
The income tax thresholds and tax rates for residents (excluding the Medicare levy) are:

2014-2015 Income year (current) 2015-17 Income years
Taxable Income ($) Rate Taxable Income ($) Rate
0 – 18,200 0% 0 – 19,400 0%
18,201 – 37,000 Nil + 19% of excess over 18,200 19,401 – 37,000 Nil + 19% of excess over 19,400
37,001 – 80,000 3,572 + 32.5% of excess over 37,000 37,001 – 80,000 3,344 + 33% of excess over 37,000
80,001 – 180,000 17,547 + 37% of excess over 80,000 80,001 – 180,000 17,534 + 37% of excess over 80,000
180,001 + 54,547 + 45% of excess over 180,000 180,001 + 54,534 + 47% of excess over 180,000

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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