The 2015 Federal Budget was released May 12, and contains a number of items that, if passed, will impact on a wide range of people, businesses and organisations.

Cutting through the rhetoric and the analysis, here is a summary of the key points and what action we believe needs to be considered over the coming weeks, months, and in some cases, years.

Key PointDetail / commentaryActionable StrategiesWhen should I act?
Instant write off for business purchases under $20,000 Items purchased for business purposes with a purchase price of less than $20,000 can be claimed as a 100% deduction in the year of purchase. Items with a value greater than $20,000 will still be depreciated at current rates (15% deduction year of purchase, 30% thereafter). This scheme will continue until June 30, 2017Review equipment requirements and capital investment planning, consider if purchases of equipment will be of benefit to your business. Note that this will apply to cash or appropriately financed purchases (we can assist in identifying how this is to be doneReview your position now. Look at as part of your tax planning strategies. Discuss with your client manager.
Small Business Income tax rate reduced by 1.5%Company tax rate will drop from 30% to 28.5% for companies with a turnover of less than $2 million p.a. Note that, the current maximum franking credit rate for a distribution will remain at 30% for all companies, maintaining the existing arrangements for investors, such as self-funded retirees.Review current tax position and projection for the year ahead. Is there scope to bring forward deductions and defer income to gain benefit from the tax reduction? Ensure that dividend imputation details are well documented. Look at scope for tax effective dividend policy between company and shareholders to maximise tax benefits.Applies from 1/7/2015 so for the 2015/16 year onwards. Review position at June 30, 2015 and projections for 15/16 and beyond.
Unincorporated small business to receive a ‘tax rebate’ of up to $1,000 per person (partner, beneficiary etc)Tax payable ‘reduced’ by 5% - up to a maximum of $1,000 per person on income from business. Essentially, if business income for a sole trader is > $86,000 the tax saving will be less than the 1.5% ‘declared’ due to the cap of $1,000. Same applies for partnership or trust distributions.Review taxable position – should the business become incorporated in order to increase the tax benefit? Discuss with your client manager in the next few weeks.Applies from 1/7/2015 so for the 2015/16 year onwards.
Removal of fringe benefits tax on mobile devicesCurrently, an FBT exemption applies in respect of eligible work-related items (e.g., a portable electronic device, an item of computer software, and a tool of trade). In respect of a portable electronic device (e.g., a laptop computer), the FBT exemption generally does not apply to multiple items provided by an employer to an employee in the one FBT year, where those multiple items have substantially identical functions. From 1 April 2016 , the government will allow an FBT exemption for small businesses that provide employees with more than one qualifying work-related portable electronic device, even where the items have substantially similar functions Removing the restriction that a tax exemption is only provided for one work-related portable electronic device of each type will remove confusion where there is a function overlap between different products (such as between a tablet and a laptop).Review the needs of staff in relation to items like mobile phones, laptops, Pda/ tablet devices, tools). If required – or multiple items required (e.g. smartphone AND tablet or laptop) these can be provide by the business with 100% deductibility and no FBT cost.Change applies after 1/4/2016. Current (single item) rule applies until then.
Claiming car expense deductionsFrom 1/7/2015 the motor vehicle cents per kilometre rate will be standardised and REDUCED to 66 cents per kilometre. 12% of purchase price and one third of expenses claims have been removed.Review motor vehicle claim basis – get a log book established if work related vehicle use is more than 5,000 kms p.a. No log book = no or substantially reduced claim.Applies from 1/7/15, so review vehicle claim basis now, and start recoding details to establish claim for the 2015/16 year.
Immediate deduction for professional expenses on commencing a new businessCurrently, some professional costs associated with commencing a new business (i.e., black hole expenditure) are deducted over a five-year period. From 1 July 2015, the government will allow businesses to claim an immediate write-off for a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice.If starting a new business, advice (and in some cases costs of set up etc) will be fully deductible in the same tax year instead of being written off over 5 years.Applies from 1/7/15. If looking at start-up advice etc, it may be practical to defer the billing and payment of these items til after this date.

Email “Budget Query” to office@bourkegroup.com.au to have one of our experts help you make better financial decisions.

Key PointDetail / commentaryActionable StrategiesWhen should I act?
Accelerated depreciation for primary producersCurrently, the effective life for fences is up to 30 years, water facilities is three years and fodder storage assets is up to 50 years. For income years commencing on or after 1 July 2016 (i.e., from the 2017 income year), the government will allow all primary producers to:
- Immediately deduct capital expenditure on fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills; and
- Depreciate all capital expenditure on fodder storage assets such as silos and tanks used to store grain and other animal feed over three years.
Review capital equipment requirements. If improvements are required – and can be delayed until after 1 July 2016, then 100% deduction will be possible.Start planning now. We can assume that this will pass and become law in time for 1/7/16 implementation
Changes to residency rules for temporary working holiday makersThe government will change the tax residency rules from 1 July 2016 (i.e., the 2017 income year) 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 they will be taxed at 32.5% from their first dollar of income (up to $80,000).From July 1, 2016, all backpackers /holiday workers will not be able to claim the tax free threshold on any earnings.Assuming this becomes law, new Income tax declarations will be required from 1/7/16 for casual workers / overseas working holiday employees

Email “Budget Query” to office@bourkegroup.com.au to have one of our experts help you make better financial decisions.

Key PointDetail / commentaryActionable StrategiesWhen should I act?
Change to the asset test thresholds for the aged pensionThe government will increase the asset test thresholds at which pensions are reduced once the threshold is exceeded, as follows:
- For a single person – a full pension may be received if the relevant value of included assets (i.e., assets other than excluded assets) is less than $250,000 for a homeowner (currently $202,000).
- For a pensioner couple – a full pension may be received if the relevant combined value of included assets is less than $375,000 for a homeowner (currently $286,500).
We have developed a simple calculation process to determine the impact of these changes. Please contact Kristen Quirk at our office for more information and to discuss potential impact and strategies to minimise potential pension payment changesIf legislation passes this will be implemented 1/1/2017. Please review your current pension entitlement and investment strategy and discuss with Kristen to maximise your benefits.
Commonwealth Seniors Health Care CardThe Government will ensure age pensioners who lose entitlement due to the above changes will be entitled to the Commonwealth Seniors Health Care Card (CSHC) from 1 January 2017. The CSHC is designed to assist older Australians by providing a range of concessions, including:
- Discounts on Pharmaceutical Benefits Scheme (PBS) prescription medicines§  bulk-billed doctor appointments (at the doctor’s discretion)
- Lower out-of-hospital medical expenses through the Medicare Safety Net, and
- Certain state, territory and local government concessions - such as transport or concessions from private business that vary between each state and territory.
As above

Email “Budget Query” to office@bourkegroup.com.au to have one of our experts help you make better financial decisions.

Key PointDetail / commentaryActionable StrategiesWhen should I act?
Better targeting of Zone Tax Offset (‘ZTO’) to exclude ‘fly-in fly-out’ and ‘drive-in drive-out’ workers (‘FIFO/DIDO workers’)From 1 July 2015, the government will exclude FIFO/DIDO workers from the ZTO where their normal residence is not within a particular ‘zone’. Furthermore, for those FIFO/DIDO workers whose normal residence is in one zone, but who work in a different zone, they will retain the ZTO entitlement associated with their normal place of residence.Review tax arrangements with employer to ensure tax deducted is adjustedApplies from 1/7/2015
Claiming car expense deductionsSee above in small business owners section
Recovery of HELP repayments from overseas debtorsFrom 1/1/2016, if you have a HELP / HECS debt you must register with the ATO if you intend being overseas for more than 6 months. Payments of HELP debt (based on income thresholds) will apply from 1/7/2017Ensure that overseas based employment factor in the likelihood of tax / HELP payments being made to the ATO.Awaiting further information from the ATO to determine how this will apply. Action to be taken on or after 1/1/2016
Income tax relief for Australian Defence Force personnel deployed overseasThe government will provide income tax relief for Australian Defence Force personnel deployed on Operations AUGURY and HAWICK. A full income tax exemption will be provided to personnel on Operation AUGURY and the overseas forces tax offset will be available to personnel on Operation HAWICK.If posted on these operations, ensure tax offset / relief information is confirmed with HR department

Email “Budget Query” to office@bourkegroup.com.au to have one of our experts help you make better financial decisions.

Key PointDetail / commentaryActionable StrategiesWhen should I act?
Changes to Parental Leave Pay (‘PLP’)Currently, individuals are able to access government assistance in the form of PLP, in addition to any employer-provided parental leave entitlements. From 1 July 2016, the government will remove the ability for individuals to 'double dip’, by taking payments from both their employer and the government. The government will ensure that all primary carers would have access to parental leave payments that are at least equal to the maximum PLP benefit (currently 18 weeks at the national minimum wage).Review employment contract – is there scope to alter agreements to arrange Parenting Leave Payments to be taken another way?Subject to legislation passing.
Child care (workforce participation stream)A new single Child Care Subsidy (‘CCS’) will be introduced on 1 July 2017 . Families meeting the activity test with annual incomes up to $60,000 (2013/14 dollars) will be eligible for a subsidy of 85% of the actual fee paid, up to an hourly fee cap. The subsidy will taper to 50% for eligible families with annual incomes of $165,000. The CCS will have no annual cap for families with annual incomes below $180,000. For families with annual incomes of $180,000 and above, the CCS will be capped at $10,000 per child per year. Eligibility will be linked to a new activity test.This will replace the current two part system which will cease on June 30 2017.This may impact the level of rebate / offset that you / your children’s Child care centre receives and hence impact on the level of pit of pocket fees that you will pay. It is likely that in many cases, the cost of child care will increase due to the loss of the 50% uncapped rebate that many currently receive.
Cessation of the Large Family Supplement of Family Tax Benefit (FTB) Part A and reduced portabilityThe government will cease payment of the additional FTB Part A Large Family Supplement from 1 July 2016. Families will continue to receive a per child rate of FTB Part A for each eligible child in their family. The government will also reduce the amount of time FTB Part A will be paid to recipients who are outside Australia. Currently, FTB Part A recipients who are overseas are able to receive their usual rate of payment for six weeks and then the base rate for a further 50 weeks. From 1 July 2016, families will only be able to receive FTB Part A for six weeks in a 12 month period while they are overseas.Contact Centrelink to discuss changesTo apply from 1/7/2016 – if legislation passes
Medicare levy low income thresholds for 2014/15For 2014/15, the Medicare Levy low income thresholds will be as follows: Individuals $20,896 (previously $20,542), Families $35,261 (previously $34,367) The families income threshold (i.e., $35,261) will be increased by $3,238 (previously $3,156) for each dependent child or student. For single seniors and pensioners, the threshold will be increased to $33,044 (previously $32,279).Applies from 1/7/14

Email “Budget Query” to office@bourkegroup.com.au to have one of our experts help you make better financial decisions.

Key PointDetail / commentaryActionable StrategiesWhen should I act?
Release of superannuation for terminal medical condition – relaxing the release criteriaBroadly, before an individual with a terminal medical condition can currently access their preserved superannuation benefits (generally as a tax-free lump sum), two registered medical practitioners (including a specialist) must certify, jointly or separately, that the person is likely to die within a one-year period. From 1 July 2015, the government will extend access to superannuation for people with a terminal medical condition by extending the above certification period (i.e., the period within which the individual is likely to die) to two years. This will give terminally ill patients earlier access to their superannuation entitlements.
Contribution capsReview current super contributions – do you need to adjust any salary packaging / sacrifice amounts being paid to super to keep within the contribution levels?
Contribution typeContributions includedCap applying in 2015/16
ConcessionalAll employer contributions (including SG and salary sacrifice), personal contributions claimed as a tax deduction and certain other amountsAged 49 + on 30/06/201535000
Aged < 49 on 30/06/201530000
Non-concessionalPersonal after-tax contributions, spouse contributions and certain other amounts$180,000 or $540,000 provided you are aged 64 or under on 1/07/2015, don’t exceed this amount over a three-year period and meet certain other conditions

Email “Budget Query” to office@bourkegroup.com.au to have one of our experts help you make better financial decisions.