Not another budget update (2015)!!!

I confess to some weariness regarding the Federal Budget already, and it hasn’t even been 24 hours!
The experience of last year, whereby very little of what was announced seemed to become law, plus the political machinations that followed, left many questioning was anyone actually running the country.  But no matter what side of that fence you sit on, the reality is we all need to take at least some notice of what was announced last night as there is always something that will affect each one of us personally, not to mention the broader implications for our country.

2015 Budget Update

So here is a super quick budget update of the key announcements as they pertain to our Clients, their businesses, their taxes and their wealth building including some commentary on the value of the measure as we see it –

• On the face of it, the Budget appears to be designed to help stimulate the economy via small business, however to be frank, a number of the measures have limited actual value to our small business clients, and in some cases I actually think the measures will increase compliance costs!
• Having said that, the immediate tax deduction for small businesses purchasing plant & equipment costing less than $20,000 will definitely save tax and I am sure will encourage people to invest in their businesses and give a boost to the economy (particularly between now and 30 June) .  Hopefully it doesn’t also result in people over extending themselves in terms of spending they can’t afford and unnecessary borrowing.
• The cut to the company tax rate for small business I feel has very little actual value for the majority of our Clients.  It just means ultimately more top up tax when profits are taken out of companies as dividends!  It actually also makes calculating and estimating tax expenses just that little more difficult and makes managing franking accounts (the record of tax credits available to be passed on to shareholders) more difficult as the percentage of tax credits attached to dividends is now different to the percentage of tax paid by the company!
• The 5% tax discount on business income earned via structures other than companies will result in a small tax saving for many Clients.  But the saving is modest at best and again the manner in which it is applied just adds another layer of complexity and makes calculating and estimating tax expenses that more difficult.
• The additional FBT concessions for “portable electronic devices” has limited practical value, it simply brings the law up to date matching what everybody was already doing.
• The changes to depreciation for primary producers will certainly help reduce their tax bills and encourage investment in this area, and this is a very welcome measure.  Primary producers can often feel forgotten given the focus on the mining sector in this county.
• Per our newsroom post last week, capital gains tax rollover relief for business restructuring has been announced though it won’t apply till 2016.  The reality is that with good planning most of our Clients would have already avoided tax on a restructure.  The exception is Stamp Duty levied by the State Government, and there has been no change to this (despite it being announced previously and then revoked).
• Also as we already posted about, the change to the deductibility of professional fees and set up costs when commencing business is certainly a welcome measure.  It was always counter intuitive that they were not immediately deductible when clearly they were expenses incurred with a view to starting a business and earning income.  Unfortunately the change doesn’t take effect for another year.
• The Zone Tax Offset changes will definitely hit the back pockets of fly-in fly-out workers.  Though I think the reality is the changes just bring the rules into line with the original intentions (right or wrong).
• The changes to the way work related car expenses are calculated and claimed make sense, as the methods being removed are barely used these days (though unfortunately the rate applicable to the cents per kilometre method has dropped for many taxpayers resulting in a reduced tax deduction)?
• No news is good news when it comes to super.  Despite the scare mongers touting it as a tax dodge for wealthy people, the reality is super is vital to support Australians in retirement, to fund our aging population and its importance increases every year.  Every time the rules change people lose faith in the system, so as I say, no news is (very) good news!

Unfortunately I think you can see I am a little cynical about this year’s Budget.  Maybe it will garnish some poll numbers and even some votes, but in terms of adding real value to the country and in particular our Clients, I don’t feel it is earth shattering.  But hey, at least no real damage was done either 🙂
For more information, visit the Official Federal Government Budget website here.