PERSONAL INCOME TAX

There were no changes to personal marginal tax rates for resident or non-resident taxpayers in this year’s budget. However, the following changes in relation to personal income tax were announced:

Motor vehicle expense deductions

• The ’12 per cent of original value method’ and the ‘one-third of actual expenses method’ will be removed.

• The ‘cents-per kilometre method’ will be modernised by replacing the three current rates based on engine size with one rate set at 66 cents per kilometre to apply to all motor vehicles, irrespective of engine size.

• The ‘log-book’ method will be retained and these changes will not affect leasing and salary sacrifice arrangements.

Fringe Benefits Tax (FBT) 

• From 1 April 2016, a new separate single grossed-up cap of $5,000 will apply for salary sacrificed meal – entertainment benefits for employees in the non-for-profit sector .  All use of meal entertainment benefits will now be a reportable fringe benefit.
• Meal entertainment benefits exceeding the separate grossed-up cap of $5,000 can also be counted in calculating whether an employee exceeds their existing FBT exemption or rebate cap.

Higher Education Loan Program (HELP)

• From 2016-17, HELP debtors residing overseas for six months or more will be required to make repayments of their HELP debt if their worldwide income exceeds the minimum repayment threshold at the same repayment rates as debtors in Australia. For 2015-16, the compulsory replayment threshold will be $54,126.

Employee Share Schemes

• Exclude eligible venture capital investments from the aggregated turnover test and grouping rules (for the start-up concession).
• Provide the capital gains tax discount to employee share scheme interests that are subject to the start-up concession, where options are converted into shares and the resulting shares are sold within 12 months of exercise.
• Allow the Commissioner of Taxation to exercise discretion in relation to the minimum three-year holding period, where there are circumstances outside the employee’s control that make it impossible for them to meet this criterion

CORPORATE TAX CHANGES

Small businesses

Tax cuts and tax discounts for small businesses

• Small businesses that are companies with an aggregated annual turnover of less than $2million will receive a tax cut of 1.5 per cent in 2015-16.

• Companies exceeding the $2million threshold will be subject to the existing 30 per cent company tax rate on all taxable income starting 2015-16. The current maximum franking credit rate for a distribution will remain unchanged at 30 per cent for all companies .

• Unincorporated small businesses will receive a tax discount of 5 per cent, capped at $1,000 commencing 2015-16.

Immediate deductibility for professional expenses of small businesses

• Businesses will be able to make an immediate deduction for a number of professional expenses associated with starting a new business. The expenses will include certain professional, legal and accounting advice expenses and will commence from the 2015-16 income year.

Expanding accelerated depreciation for small businesses

• Small businesses with an aggregate annual turnover of less than $2 million will be able to immediately deduct the cost of assets, provided the asset cost is less than $20,000 

SUPERANNUATION CHANGES

Access to benefits

Release of superannuation benefits for terminal medical condition

• The conditions under which an individual suffering a terminal illness can access their superannuation benefits will be amended. Currently, access to benefits using the ‘terminal medical condition’ condition of release requires an individual to obtain certification from two medical practitioners (one of whom is a specialist practising in the area related to the injury or illness) stating they are likely to have less than 12 months to live. This time period is proposed to be extended to 24 months with effect from 1 July 2015.

Cutting red tape – lost and unclaimed superannuation

• A package of measures that will reduce red tape for superannuation funds and individuals will be implemented. The measure removes redundant reporting obligations and streamlines lost and unclaimed superannuation administrative arrangements. The changes will make it easier for individuals to claim their lost and unclaimed superannuation. The measures will take effect from 1 July 2016.

SOCIAL SECURITY AND FAMILY ASSISTANCE CHANGES

FAMILY ASSISTANCE

Parental Leave Pay

• The ability for individuals to double dip, by taking payments from both their employer and the government, will be removed. Currently individuals are able to access government assistance under the existing Parental Leave Pay (PLP) scheme, in addition to any employer-provided parental leave entitlements.

• All primary carers will have access to parental leave payments that are at least equal to the maximum PLP benefit (currently 18 weeks at the national minimum wage).

Child care

• A new Child Care Subsidy that will replace the current Child Care Benefit, Child Care Rebate and Jobs, Education and Training Child Care Fee Assistance programs from 1 July 2017.
• Eligibility for the new Child Care Subsidy will be based on an activity test and a means test. Families with incomes of up to $60,000 (in 2013/14 dollars) will be eligible for a Child Care Subsidy of 85 per cent of the lesser of the actual child care fees and a benchmark price per child. The subsidy rate will reduce to 50 per cent for families with income of $165,000 and above.  The subsidy amount will be capped at $10,000 per child for families with income of $180,000 and above. No cap will apply for family incomes of less than $180,000.

SOCIAL SECURITY

Age Pension

• Changes to the means test used to determine eligibility for the Age Pension including increases to the ‘asset free area’ for the full pension and assets test reduction rate and a subsequent reduction in the part-pension cut-out thresholds. Under the proposed changes, couple homeowners can have up to $375,000 in assets (not including their home) and receive the full pension, while those with assets over $823,000 will not be eligible. This compares to current arrangements when those with assets up to $1,200,000 receive a part pension. The changes are proposed to come into effect from 1 January 2017.

• Pensioners affected by the proposed changes to the Age Pension means test will be guaranteed eligibility for either the Commonwealth Seniors Health Card or the Health Care Card

Income test treatment of defined benefit pensions

• The social security means testing of certain defined benefit pensions will be amended to impose a cap on the deduction amount available under the income test. Currently, a portion of an individual’s defined benefit pension, based on the tax free component, is not counted as income for social security purposes, which can result in a significant amount of income being disregarded in assessing eligibility for pensions under the income test. From 1 January 2016, this deduction amount will be limited to 10 per cent of the value of the annual pension for defined benefit pensions payable from public sector and corporate defined benefit schemes.

AGED CARE         

Means testing arrangements

• The aged care means testing arrangements for residents who pay their accommodation costs by periodic payments will be alignted with the arrangements that currently apply to those who pay via a lump sum. This will remove the rental income exemption for aged care residents who are renting out their former home and paying their accommodation costs by periodic payment. This measure will apply for new residents entering care from 1 January 2016.