Budget Brief: Business
Whilst most of the focus has been on the changes impacting families there are a number of changes and continuing uncertainty that impact business. These are highlighted below:
- Confirmation that the Government are committed to cutting the company tax rate by 1.5% (to 28.5%) from 1 July 2015. For large companies, the reduction will offset the cost of the Government's 1.5% Paid Parental Leave levy.
For small companies, this represents a real saving and will naturally result in a reduction in imputation credits available for future dividends.
- Reduction in R&D offset rates will be reduced by 1.5%, with effect from 1 July 2014 to 43.5% and 38.5% for the refundable and the non-refundable offsets respectively.
The refundable offset applies to entities (including groups) with a turnover of less than $20m. This aligns with the reduction in company tax although the reduction in the R&D offsets takes effect from 1 July 2014.
- There is still no resolution in respect of the SME instant asset write-off as the Government’s repeal of the MRRT was defeated in the Senate. This means that the associated measures including the $6,500 instant asset write off still stands despite the Government's intention that it be scaled back to $1,000 from 1 January 2014.
There are a number of transitional rules that require consideration for assets purchased between 1 July 2013 and 1 January 2014 that fit the criteria.
- Fringe Benefits Tax rate will be increasing as a result of the 2% Temporary Budget Repair Levy increasing from 47% to 49% from 1 April 2015 until 31 March 2017 to align with the FBT income year.
It should be remembered that the FBT rate increased in the 2014/15 FBT year due to the increase in Medicare Levy from 1.5% to 2% moving the FBT rate from 46.5% to 47%.
- Whilst not part of this budget it should be remembered that for income years commencing after 1 July 2014 the safe harbor thresholds for thin capitalisation have been reduced from 3:1 to 1.5:1 for general entities, however, the debt deduction de-minimus threshold increases to $2m.
- The superannuation guarantee rate will be lifted from 9.25% to 9.5% at 1 July 2014 (refer to the Superannuation section).
If you have any questions in relation to the budget and how these change may impact you or your business please contact your relevant ESV engagement partner on 9283 1666.