2016 Budget — Business taxation measures
The 2016 Australian Government Budget contains important reforms to the tax system that helps small business and also working to reduce multinational tax avoidance.
Company tax —
The Australian Government will reduce the company tax rate to 25 per cent over 10 years. The tax rate for businesses with an annual aggregated turnover of less than $10.0 million will be 27.5 per cent from the 2016‑17 income year. The threshold will then be progressively increased to ultimately have all companies at 27.5 per cent in the 2023‑24 income year. The annual aggregated turnover thresholds for companies facing a tax rate of 27.5 per cent will be:
$25.0 million in the 2017‑18 income year;
$50.0 million in the 2018‑19 income year;
$100.0 million in the 2019‑20 income year;
$250.0 million in the 2020‑21 income year;
$500.0 million in the 2021‑22 income year; and
$1 billion in the 2022‑23 income year.
In the 2024‑25 income year the company tax rate will be reduced to 27 per cent and then be reduced progressively by 1 percentage point per year until it reaches 25 per cent in the 2026‑27 income year. Franking credits will be able to be distributed in line with the rate of tax paid by the company making the distribution.
This measure will cost $2.65 billion over the next four years.
Unincorporated tax discount —
The Government will increase the tax discount for unincorporated small businesses incrementally over 10 years from 5 per cent to 16 per cent. The tax discount will increase to 8 per cent on 1 July 2016, remain constant at 8 per cent for eight years, then increase to 10 per cent in 2024‑25, 13 per cent in 2025‑26 and reach a new permanent discount of 16 per cent in 2026‑27. This will coincide with staggered cuts in the corporate tax rate to 25 per cent. The current cap of $1,000 per individual for each income year will be retained.
The tax discount applies to the income tax payable on the business income received from an unincorporated small business entity. Access to the discount will be extended to individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $5.0 million.
This measure will cost $450 million over four years.
Multinational tax avoidance —
The Government will introduce a new tax aimed at multinational corporations that artificially divert profits from Australia. The tax will apply to income years commencing on or after 1 July 2017. This measure is estimated to have a gain to revenue of $200.0 million over the forward estimates period.
The new tax will target companies that shift profits offshore through arrangements involving related parties:
||That result in less than 80 per cent tax being paid overseas than would otherwise have been paid in Australia;
||Where it is reasonable to conclude that the arrangement is designed to secure a tax reduction; and
||That do not have sufficient economic substance.
Where such arrangements are entered into, this measure will apply a 40 per cent tax on diverted profits to ensure that large multinationals are paying sufficient tax in Australia.
This measure will apply to large companies with global revenue of $1 billion or more. Companies with Australian revenue of less than $25 million will be exempt, unless they are artificially booking their revenue offshore.
This update was issued on 3 May 2016 and please note that changes in circumstances after the publication of material or information may impact upon its accuracy (including passage of the supporting legislation through the parliament) and also compliance obligations. It is recommended that expert advice be sought before taking action based upon the information presented here.
Member Engagement —
ADIA provides leadership, strategy, advocacy and support. Our members set our agenda, fund our activities and directly benefit from the results. With respect to the Association's work to ensure that the initiatives within the 2016 Australian Government budget support the dental industry, the team in the ADIA national office receive advice and guidance from members serving on the ADIA-BAC Business Affairs Committee.
Further Information —
To keep up to date with how ADIA is working to ensure that the Australian Government budget supports the dental industry, subscribe to the Twitter feed @AusDental or follow us on Facebook at www.facebook.com/dental.industry. Alternatively, you can contact the Association via email at email@example.com or by telephone on 1300 943 094.
This information is available for your use under a Creative Commons Attribution 3.0 Australia licence, with the exception of the ADIA logo, other images and where otherwise stated.
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