Federal Budget 2016: What happened last year, and what’s ahead?

Federal-Budget-2016-blog

In just a few short weeks the Canberra coffers open. The night of the Federal Budget is a nervous one for many businesses, waiting to see if the powers that be will provide any nuggets of gold for the year ahead.

Some good news would be welcome. The latest Dun & Bradstreet Business Expectations Survey dropped 12.6 points in April, which indicates that businesses aren’t optimistic about sales, employment, profit and capital investment during the rest of the second quarter.

With the share market remaining volatile, interest rates remaining low and weakness in the property industry starting to appear in Melbourne and Sydney, businesses could be forgiven for feeling a little nervous.

Before the big day arrives on 3 May, let’s look back on last year’s budget results.

As you might recall, the budget breakdown revealed good news for business. Can that good luck be repeated?

We’ll see. But for now, let’s take a look at what’s happened in the last 12 months.

What happened in 2015: Small business tax cut

The big win from last year’s budget night was the announcement small businesses, (earning under $2 million a year), would receive a tax cut worth 1.5 percentage points from 30 percent to 28.5 percent.

That legislation was passed in July of 2015.

What about this year?

There is some indication the Treasurer will look to reduce the company tax rate even further, with other developed economies having already lowered corporate rates. However, any move will likely target large businesses, with small businesses already enjoying their tax cut.

What happened in 2015: Tax discount for unincorporated businesses

A tax rate reduction is nice, but most small businesses aren’t incorporated, and as a result won’t receive any benefit.

For those businesses, including sole traders, a tax discount – worth 5 percent up to $1,000 – was announced.

What about this year?

The current discount lasts until 2017, but there is a chance it could be extended. However, it was former Prime Minister Tony Abbott who introduced the policy – whether Malcolm Turnbull and Scott Morrison opt to extend this benefit remains to be seen.

What happened in 2015: $20,000 tax write-off

One of the biggest wins last year was the announcement of a $20,000 upper limit for immediate tax write-offs. Anyone with an ABN was given the ability to instantly write off a purchase up to $20,000 on their next tax return.

What about this year?

The current write-off plan lasts until 1 July 2017, so businesses still have some time to take advantage. Any extension of the write-off will be a welcome surprise.

SuperStream

Although it wasn’t particularly called out in the Budget, the government did introduce new regulations last year for businesses reporting superannuation contributions.

On 1 July 2015 businesses with 20 or more employees were required to submit contribution records electronically.

What about this year?

From 1 July, 2016, all businesses paying staff will need to abide by SuperStream regulations.

We’ve actually done a lot of work preparing for this, so you can read everything you need to know here.

What happened in 2015: Everything else

The 2015 budget was good to business. Among the other benefits listed above, businesses received:

  • A fringe benefits tax exemption for small businesses with turnover under $2 million, which give their employees more than one qualifying work-related portable electronic device
  • Funding for startups and entrepreneurs, including changes to employee share schemes
  • The ability for small businesses to change entity structures without getting hit by capital gains tax
  • $19 million for employers to help unemployed job seekers, along with $25 million in funds to help people look for work

What about this year?

  • General tax changes. While the scope and function of those changes is still being debated, every sign points to at least some change in personal tax.
  • With recent reports on the ballooning costs of the Higher Education Loan Program, changes to repayment rates and other logistics are expected.
  • Changes to the superannuation system, with Treasurer Scott Morrison saying superannuation shouldn’t be viewed as a wealth creation vehicle. Adjust your expectations for budget night accordingly.