Overall, we see it as a steady budget, with a focus creating jobs through infrastructure projects, assistance for companies who innovate, and incentives for small to medium business who employ approximately 70% of Australia’s workforce. This is great for contractors as well, as company incentives are sure to have a knock-on effect.
The measures to promote jobs and growth are seen in the company tax rate reduction over 10 years, to 25%. A slower move to reach this lower point (compared to say, the UK), but a start.
We found Deloitte’s ‘word cloud’ – the keywords representing the budget online – to be encouraging. ‘Jobs and growth’ and ‘economic plan’ are the words & phrases with greatest emphasis for online presence of this budget.
This budget indicates a real shift away from recent years’ heavy reliance on the ‘2 speed economy’ borne of the mining boom. This is evidenced in:
- broader tax incentives for investing in early-stage innovative companies
- tough on taxation for multinationals who appear to be aggressively structuring to avoid tax in Australia (the ‘Google Tax’), and offering a lower tax rate environment for those perceived to be doing the right thing in Australia
- diverting contributions from super, the discussion is now moving toward high-net-worth individuals investing in start-ups instead: a change in the risk appetite of investors (referring to Turnbull’s innovation statement in December 2015)
- early stage innovation companies have access to capital, the government has reduced from 3 years to 12 months for angel investors to access the 10 year capital gains exemption (but angel investors can’t be associated with the companies in question)
- entrepreneurs investing in fintech companies, will get a leg-up from a new ASIC program allowing ideas to be road-tested in a ‘regulatory sandbox’
- a simplification of GST reporting requirements from July 1 2017
Real growth in our economy – that is GDP – has been modest since our initial recovery from the GFC. Treasury is forecasting sound upcoming economic growth, although not at rates above 3% (benchmark) in the current or forthcoming financial year.
Implications for Individuals:
An improvement in tax structures for individuals is evident: the threshold for the middle tax bracket had been increased from $80k to $87k which prevents 500,000 Australians being pushed into the 37% tax bracket – thus avoiding ‘bracket creep’.
A new roadmap to help young people enter the workforce is evident: helping them become ready for work through training & internship incentives will help to shift the concerns of business around upcoming generations’ preparedness for work.
Other implications for individuals:
- $1b will be spent on allowing the self-employed to deduct their super contributions from tax: a positive for contractors
- people who don’t salary sacrifice can make catch-up payments in the following years if their super balance is below $500k
- $1.6m cap on amount of Super that can be transferred tax-free into retirement phase
- 30% tax on concessional Super contributions extended to those earning over $250k
- annual concessional Super contributions cap cut to $25k for all
- lifetime cap on $500k on all non-concessional Super contributions
- higher income earners forced to save more money outside Super due to changes
We’re inclined to concur with the sentiment voiced by Australian Industry Group Chief Executive, Innes Willox:
“In an important boost to the capacity of businesses to invest and create jobs, the Budget sets a gradual path to restore the competitiveness of Australia’s company tax system. While the two-tiered company tax system will continue for a number of years and it will be a decade before the company tax rate will reach 25%, many small to medium-sized businesses will see more immediate benefits and face improved incentives to invest.”
If you’re interested to learn more about the implications of the Budget on your business and your contractors, please get in touch with me on firstname.lastname@example.org