Federal Budget 2016: an overview
What you need to know about Budget 2016
The 2016 Federal Budget was announced with the government citing a clear focus on jobs and growth. In particular, the Budget provides benefits to small businesses and middle income earners. Let’s take a look at these two key announcements.
Middle income earners
The government announced it would lift the threshold on the 32.5% tax level from $80,000 to $87,000, removing many taxpayers from the 37% tax rate.
Treasurer, Scott Morrison, said that this decision was made to provide room in our tax system for average full-time wage earners to earn more without being taxed more.
Ten year enterprise tax plan
The company tax rate will be reduced to 25% from 30% over ten years. From 1 July 2016, the small business tax rate will be lowered to 27.5% and the turnover threshold for small businesses eligible for it will increase from $2 million to $10 million per annum.
The government plan to make more businesses eligible for the lower tax rate in the years to come. The lower company tax rate of 27.5% will apply to businesses with up to $25 million in annual turnover in 2017-18, to $50 million in 2018-19 and $100 million in 2019-20.
Phase two of the ten year plan will extend the lower tax rate of 27.5% to all businesses by 2023-24. It will cut the rate to 25% for all businesses by the end of 2026-27.
As in last year’s budget, small businesses are eligible for 100 per cent tax deduction for any individual assets purchased that costs less than $20,000. From July, this will apply for a year to businesses with a turnover of less than $10 million.
The government said its ten year enterprise tax plan “will boost new investment, create and support jobs and increase real wages, starting with tax cuts for small and medium-sized enterprises”.
For small business owners, like so many of us, the 2016 Budget offers great opportunity to invest more into our businesses. It will be interesting to see how things unfold throughout the election campaign.