Treasurer Scott Morrison has just delivered his first budget on an election year. Here's the tl;dr summary from SMH — Winners & Losers. From tax perspective:
Winners:
Losers:
How are the OzBargainers affected by this year's federal budget?
instant tax write off for assets under $20k still there?
For small business, yes until June 2017.
Unfortunately thats been a middle class welfare rort as well haven't seen the govt. once release details on all the new jobs created because of this incentive. How many billions has this cost us?
More vote buying from the Libs
Err. $20k instant write off is more of helping the cash flow for small business to allow them investing on expensive equipments upfront. Small business are still paying similar amount of tax — either instant write off, or depreciate over x years. If anything it's actually encouraging spending & simplifying taxation matters.
So what details are you using to support that it's a sort?
Our own business has used this write-off extensively to expand in the past year. As a result, its helped employ two new full-time staff.
The write-off is pretty much the same as before, its just quicker and simpler to improve immediate cash flow.
@zhenjie:
By your own comment it's done enough. Your business expanded whereby 2 rules were created and spent money to other businesses who wouldn't have received the sale if it wasn't for the write off.
$6 a week for those earning over $80k. $16,000 tax cut per year for someone earning $1 million. Yet 75% of workers won't see a tax cut at all.
Seems they're targeting these tax cuts at those who need them least. Also, do they really want us to applaud their small business tax reduction to 27.5% when Labor has already committed to 25%?
$16,000 tax cut per year for someone earning $1 million
Where does this come from? The changes to income tax only gives them $315
Removal of deficit levy
The deficit levy was always temporary though - slug high income earners an extra 2% for a couple of years and still people complain. What is your ideal top marginal tax rate?
@qazwsx: Yes it was temporary. But the fact that the deficit has worsened would suggest that it has not yet accomplished it's purpose…
@uder:
It does not matter how much water you put in a bucket full of holes. You will never fill it up!
https://au.news.yahoo.com/thewest/wa/a/31147323/56-aussies-p…
Interesting 11,056 people earn over $1M+ in OZ
56 Pay nada but These 11,000 paid more than $11.5 billion in net tax on almost $26 billion in taxable income.
Fantastic.
At a time when, according to the stupid twats in charge no less, Australia is facing unprecedented levels of pressure on public infrastructure such as hospitals, emergency services to save your life and prevent injury or death to you and your property.
Mainly because businesses generally are paying less and less tax. Other than the Top 500 who are paying an average of 2% with the top 2/3 paying 0%.
So it's at this time that the stupid twats announce further lowering of business tax.
Also, seriously, I'll believe the multinational tax crackdown when I see it. Who do you think is paying the bills in Canberra along with providing industry advisors?
Just as an example it'll be no surprise to anyone that Turnbull retires to a position in Telstra given what he's already done for the company in his role as Telecommunications Minister and now Prime Minister.
Turnbul will retire to something to do with water…It;s how he made it, it's how he'll end it…
Haha the only stupid twats are the ones who believe those tax figures you've given! Where did you get them from? Do you understand the difference between revenue and profit?
Ask any economist in the world and they will tell you that company tax is the best to cut if you want to promote growth. And FYI we currently have the 7th highest company tax rate in the OECD (34 countries).
I think you'll find that your definition of "any economist" is rather narrow and reflects the neoliberal orthodoxy that has since shown to lack any real evidence, akin to the now infamous trickle-down nonsense of the 80s.
what average 2% tax rate, and top 2/3 at 0%
You're making this up
Whilst I thought that the budget lacked 'ticker', they did introduce a RETROSPECTIVE cap on the transfer of superannuation balances into the retirement phase, set at $1.6 million, limiting the amount of tax-free income wealthy retirees can earn.
This was only a matter of time. This exemption was ludicrously generous.
What's the incentive to be a high income earner with a ridiculous amount of super tax? It will just move investment into non-super investment and further tax avoidance
Incent those who are creating jobs. Company tax cuts does not translate to more jobs or growth, it's just more profit
As has been pointed out the majority of this benefit will actually go to foreign shareholders due to our system of imputation.
So hidden amongst the budget updates is this update that's going to impact most OzBargainers:
"… from 1 July, 2017 all online sellers with an annual turnover of $75,000 or more will charge 10 per cent GST for goods under $1000."
http://m.thenewdaily.com.au/money/2016/05/03/eight-weirdest-…
ok
That's for Australian-based sellers though right?
Because if I ran a business in Australia and I had USA based customers and the IRS asked me to start paying them a value-added tax I'd ignore it.
It is for overseas sellers. The bigger players may comply, but I'm not sure if there is any way the Aus Govt could enforce.
I'm not an online seller, but:
a) You have to pay GST anyway if you're operating as a business. So what's changed? The threshold up to which you can say it's just a hobby and avoid taxes?
b) 75k turnover is tiny. Note, not 75k profit, 75k turnover. Think about it: what kind of tiny margins must you need to have to be competitive against overseas sellers as an Australion online seller? How much profit would someone with 75k turnover be making? 30k? 10k? 5k? That's not even "full-time job level" income. They're not going after successful sellers or those who can afford it.
So much for the Liberals being in favour of entrepreneurs and small businesses…
What has changed: it applies to overseas businesses now.
75k is tiny. It is just to separate 'once off selling' like an online garage sale or a small time hobby with 'small business'.
Considering we are talking about online, where margins are extremely thin, 75k turnover is probably around 5k for reselling and 10k for value adding.
This is for overseas sellers selling into Australia. Pretty sure they don't pay a cent of GST.
75k threshold is because that is the exact same threshold that applies to Australian businesses before they have to register for GST. In case you were wondering why that number was plucked out.
The cost of stuff from amazon, B&H, ASOS or the Hut might go up by 10% but if you buy from a small overseas seller from ebay, I guess there won't be a big difference.
If it's aimed at overseas sellers, I don't see anyone complying. How could they enforce it?
Hopefully it's just to placate Liberal party donors who still see the internet as a fad their grandkids are into that's incomprehensibly somehow cutting in to their fat easy-money profits…
Amazon is already complying, collecting an extra 10% for orders to Australia over $1000. After 1 July 2017 this will apply to all orders.
@lolmao: Oh great 50% of my income will now go into the government's pocket. Luckily I'm going to get back all of that amazing healthca… ah no they cut it. Well there's always the AB… oh they cut that too. Well what the hell are they doing to earn my extra 10%?! Nothing.
Scum, I hope they all get wiped out.
Does this mean that local consumers can buy items from overseas from 1 July 2017 and get the gst back from the trs?
This is more targeted towards Kogan I guess
They should put a bit more focus into reducing Welfare, that is by far the biggest spend at ~$140B a year.
Not sure why you got downvoted. Makes sense that a way to address budget deficits is to have a look at your largest expenditure item.
Problem is too many voters on welfare themselves today. Self-perpetuating cycle, they just keep voting for more cash until credit card runs dry ahem Greece.
Live q&a with Ross Gittins from 12.30pm for those who want to ask their own questions about the Budget
http://www.smh.com.au/business/federal-budget/budget-2016-li…
bikie?
When even scotty starts meme'ing…
Might have to search the database to see whoever was the first one putting that on a poll option.
Edit: It appears the first occurrence was merely 2 years ago.
All my clients with superfunds are affected. Lifetime caps of $500k worth of after tax contributions as well as limits on TTR pensions etc. Meh, they'll adapt…
They have been reducing the viability of TTR strategy since it came into fashion after Simpler Super 2007.
I thought people are making mountains of molehills with the super changes. It is quite hard to put large amounts of money into super these days with the noncon and con caps, and then having your money locked up for years with the constant tinkering every year or 2 to super rules, all to save ~30% tax just on the earnings in your super.
When times get better and people are encouraged to self fund their retirements again, who would want to put money in super given the constant tinkerings and "enhancements" that keep happening?
We are all losers with that much of a budget deficit and no real plan to bring it back to black
There's no value in reducing a federal budget deficit unless the broader economic cycle requires it.
Might be a good idea to study some basic high school economics.
The federal budget deficit/surplus size is decided by monetary policy, not the by choices of politicians.
Politicians can still argue about it because they made economics an elective in high school, so lots of Australians don't know this simple fact. Even though it's been that way since the problem was permanently solved by Keynes after the great depression (preventing future depressions - the worst we've had since are recessions). It allows our politics to be retarded by debate about facts that aren't open to debate, instead of important issues like corruption.
I agree with your statement, could have been written a bit more tactfully though. A government's budget is a lot different to a household budget.
The thing that bothers me is this youth internship thing cant find much to explain how it works. If the business trades/works on weekends are these kids required to work then. If so is this a sneaky way of getting rid of penalty rates on weekends?
Or a sneaky way of getting people to actually work…?
You are exactly right! Its still early days so I don't think they figured that one out yet. Like Howard's Work Choices, companies found (unintended) ways to use it to their advantage. Hence will need some rules around it to prevent such abuse. Usually these loop holes are brought out in the Senate and the legislation is modified accordingly.
To Quote AustralianSuper:-
"Changes to the work test if you’re under 75
From 1 July 2017, if you’re between 65 and 74, you no longer need to meet the work test to make before or after-tax payments to super.
Personal payments to super
From 1 July 2017, anyone under 75 can claim a tax deduction for personal payments they make to super up to $25,000. The $25,000 limit also includes employer contributions. A 15% contributions tax will apply."
Yes, But cap was previously $35,000 - but cut right back. Silly really if super account balances are under $1M for someone almost ready to retire. They will just have to rely on the pension in just a few years. Wont they?
With a million dollars in super, if spent wisely, you will be statistically more likely to be dead than run out. Provided you own your own home as well. Otherwise, yes, for non home owners that will be the case. Of course if you do own your home there's more equity again there to be used in a reverse mortgage unless you're planning to live forever.
Unfortunately Income Tax has become like the old 'sales tax'. Easily avoided/rorted by many. It is a shame that no one has the 'ticker' to reduce income taxes and increase GST. A consumption tax is difficult to avoid, and the more that you spend, the more that you pay.
Because the bottom earners wouldn't survive, most of them spend all their income just to get by.
Yep fair point. But a lot of the top earners pay little if any income tax, and one of the problems with the economy is that the government has a budget deficit. If everyone paid their 'fair' share, then I think that the government would be in a healthier position to do additional infrastructure spending - ie real job creation.
By top earners you mean companies?
Individuals have very limited taxation minimisation technqiues and dare say the people who are earning $180k+ are taxed too highly.
Precisely. I look at my tax statement, and it really blows my mind that my tax bill is large enough that it could be used to buy a brand new German car every year. Lol… my actual car is a fair bit cheaper.
I think a consumption based tax would be fair IMHO. It may sound a bit elitist (although, that is not my intention), but what "extra" am I getting for my tax over someone who is paying a $10k tax bill? I know it sounds exceedingly selfish, but to be very honest, sometimes it just seems like "forced philanthropy"… or almost like a penalty of sorts.
@GameChanger: Negative gearing, salary sacrificing, income splitting, and the list goes on. Once they have applied their income minimising they don't appear to be high income earners.
@peck: Income splitting? All these methods come at a cost, people seem to think its a free lunch, when in reality its not! Individuals deserve every dollar they make imo, if you want tax reform it should be targeted at companies who are offshoring their money. Have a look how easy it's to move money legally and pay basically no tax.
Poor ppl spend ALL of their money…. This means a consumption tax is a tax on ALL of their money.
Really? Prior to GST if you offered cash you got a 30% discount in the price. Now its only 10% because they say they wont charge you the GST. Cash economy and tax avoidance is thriving more than ever under the GST. But otherwise yes. We have the lowest GST/VAT in the western world. Time to both widen its grip and bump it up.
Luxury car tax, etc etc. The idea of consumption taxes over earning is already kind of a thing, sort of.
This will be pretty funny to watch: Australia chasing Apple and company for tax Apple currently avoids paying. Apple has the profits to hire anyone they want to find the next big tax loophole.
Yes. Exactly right. You will have uneducated immigrants employed by the tax office under the govt's equal opportunity employer scheme (that means -Sorry Aussies not welcome here) chasing companies with the best international tax lawyers in the world. Sounds good in practice but will never work. They have tried to do this so many times before.
And upon re-election the 10 year tax cut plan for companies will be legislated…
i wouldn't say health is a neutral. all medication prices will rise by $5 per script, and Medicare rebates will be frozen for six more years taking it to a total of more than a decade in a row of pay cuts to GPs..we are slowly but surely edging towards the american system
I guess I'm a winner of some kind as I have a small business and I have a investment house but I don't really care about the negative gearing anyway.
one big problem i see with the youth pathways plan is they are vulnerable to even more exploitation than they already get. they will be forced to do this free work - it wont be a choice (which is ok since they get a payment) but —- they have no assurances that they will receive any money at all for doing it. if they miss one day work in the fortnight centrelink will not anything for the entire fortnight. all work should be guaranteed meet minimum wages
Very good point there, and expanding on that businesses now have free reign to fire people when they see fit once the contract for the 'worker' ends after 6 months. They pocket the upfront cost of $1000, and after 6 months they receive $10,000. Forget job security, these businesses will just fire people and continue this horrid cycle to gain easy money. It will be absolutely ridiculous.
The money they put into this Youth Pathway plan could've been used to create actual jobs, where they respect and pay at the award rate of full-time wages and not this so called intern-ship.
Excuse me but you miss the very point you make. These people are already being paid by Centrelink. They dont need to be paid again by the employer. So how can they be exploited? Any job experience is good job experience. Only the non-genuine job seekers (bluggers) will complain.
Would you work full time for $450 a fortnight? I bet you won't even for $1000.
If I was unemployed and I needed to pay my bills and feed my family I would work for $450 a fortnight. Even if it was a job I did not like.
But I would leave that job as soon as I found another one for $550 a fortnight. And then again for $650 a fortnight and again…until I found a job that I like and possibly that pays good money.
But some find it easier to get welfare and do nothing because the jobs they can find are not "good enough"
You get paid by your employer at a standard rate (part of which the government gives to the business as a bonus), and a BONUS on your centrelink payment I believe. Also, 15-30hrs on a traineeship wage I don't believe is anywhere near enough to have centrelink payments (youth allowance, etc) cut back - all (except maybe the bonus) continues if you miss days of work.
The 'tax cut' is waste of money, though it won't cost the govt much anyway. It's just a political move to help lib voters feel a bit more smug about being lib voters.
What I find interesting is that every tax cut at the $50k bracket or up for the past 2 decades has been accompanies with the usual whining and sniping about middle/high income earner tax cuts.
When Howard was elected (way back when), the top marginal tax rate kicked in at $50,000. If all the whingers had their way and no tax cuts were delivered to the $50k+ crew for the past 2 decades, then average wage earners since about half a decade ago would have been kicked in the balls every year at the top tax rate. You know, the "high income earners club".
I understand that policies will always have winners and losers (and associated criticisms), but how can you justify an income tax cut in the current economic environment? We need more investment, not disposable income - household consumption is already doing relatively well.
Needed to do more to level the playing field, especially regarding tax avoidance and housing affordability.
Changes to negative gearing and a universal land tax (even subsidised for owner/occupier) would be a good start.
Best thing to do for housing affordability is to get rid of negative gearing. As you say..to create a more level playing field. All negative gearing does is to make it more affordable for investors to borrow more money at other tax payers expense and hence push prices up.
It really is one of the most frustrating things being a first home buyer. Me and my partner had a limit of 600k to at the very least benefit from the reduced stamp duty. But now the prices of properties is so high, this is not feasible. Our limit has increased from 700k, to now 800k, to even have a chance in competing in auctions. I go to inspections and one of the most asked question towards the agent is rent per week. I actually was saddened to hear interest rates go down even further, as that just means more competition from investors. To then know that a portion of the tax I pay is actually supporting investors really makes my blood boil.
Everyone has been saying that the market is overpriced by world standards vs income. Interest rates are dropping, indicating that the economy is not going well. Share market is flat. I hope that I am wrong, but I think that we are in for an extended recession. If that is the case, then 'cash' will be king. There will be price drops in everything, including real estate. And a contraction in jobs. People will be screaming about the job losses, and there will be pressure on the Government to reduce immigration. Even if I am wrong, and I hope that I am, I don't think that you can lose by 'keeping your powder dry'.
There is absolutely nothing in the budget to stimulate the economy.
Throwing more money at businesses to hire people and lowering their taxes wont work if people are not buying more of their goods or services.
Self funded retirees and anyone relying on their savings are being obliterated by both the govt and the RBA. That's a lot of people being forced to curtail their spending.
And as others have said, not taking this great opportunity to cut back or remove negative gearing is just stroking the rich and walking all over young people trying to buy their first home.
Sad to say the Libs have lost the plot and their balls. They stand for nothing now. Malcolm is a massive disappointment.
He has even turned his back on his neighboring (Labor held) electorate by leaving us right out of the NBN upgrade as the former Communications minister. We are stuck with old, slow ADSL technology delivering ever slower internet speeds.
Cant wait to let Malcolm know when he shows his face here again.
young people trying to buy their first home
And you know what Turnbull said? Rich parents should be shelling out for their kids' first homes
Don't take that out of context. He was speaking directly to the host and the host only because he can afford to help his kids.
Sometimes forgotten is the Div293 extra super contribution tax and super contribution tax beyond the 30k cap (new cap is 25k).
By my calculation, assuming 10% super contribution on top of salary, marginal tax rate including super tax:
So it hits the hardest particularly for people who earn between 227k and 272k (pre tax, excluding super). A lot of those people will be surprised by Div293 bills at the end of the next tax year.
So what will they do? Pump more money to negatively geared investments probably…
This budget looks good at the first glance, but when you put in the numbers it isn't as good as you think. But Labor's proposals are probably significantly worse still.
The extra tax payable is 15% of the lesser of income for Division 293 purposes less the threshold of $300,000 (soon 250k), or low tax contributions. Not saying you're wrong, just confused by your calcs.
Actually the calculation was a bit off, it's higher than I thought.
E.g. (in the new world).
The poor dude earning 225k and 25k super (for simplicity).
For the next dollar, he will be taxed 49% (income tax) plus his div293 will exceed 250k, so he will pay 15%. In total, out of the next 1 dollar, he is taxed 0.49+0.15=0.64 dollar. (marginal rate 64%)
Adjust the numbers for pre and post budget change.
That 15% is on the next $1 that goes in super, not the next $1 of income.
No. Your +1$ of income pushes your income+super beyond the 250k bar.
See the ATO page on how div293 is calculated.
@GalaxyNexus: Here it is:
https://www.ato.gov.au/Individuals/Super/In-detail/Withdrawi…
Taxable contributions will be the lesser of either:
the low-tax contributions
the amount above the $300,000 threshold.
Low tax contributions = 25000$
Amount above 250,000 (new, proposed) threshold = 250,001$ - 250,000$ = 1$
So 15% on the 1$.
On top of the extra 49% income tax + medicare levy + deficit levy on the 1$.
@GalaxyNexus: Ok, I see where you're coming from. But your marginal rate is never 64%. It's 49% on your income excluding super and 30% on some of your super instead of the normal 15%. The extra tax even comes out of your super if you want.
What I can't figure out is if it's worth salary sacrificing into super (at 30% tax) if you already know you'll be hit by Div293.
It is 64% effectively. Because you're paying Div293 from your post tax income. That extra 1$ only end up being 0.36$, which is what "marginal" means. Beyond 15%xsuper, the marginal rate comes back down to 49%.
Whether SS into Div293 makes sense, probably yes, but there won't be much money to SS anyway (if you're in that range) because all super contribution beyond 30k (or soon to be 25k) will be categorized as non low-tax contribution, taxed at 49% (this is separate to Div293). And given that default super contribution is at least 9.5% of income, there's not much room to SS on top anyway (25k - whatever your super contribution is).
@GalaxyNexus: Depends where your income has come from. If it's from salary, then there's not much room to move. If it's from investments, or employee share schemes then your super would be lower.
Guys what am I missing. The biggest problem seems to be the massive drop in/cancellations of the FTB A and B supplements at year end. If I understand it right our family will be out around $3000 a year (I have 4 young kids). Yes yes, don't have kids if you can't afford them yada yada, but that is a massive amount to take away from families and yet media interest is so muted on it (and even here no one has mentioned it). Did I read wrong, or was this already done in an older budget maybe?
Here is Labour responding to it: http://www.jennymacklin.net.au/turnbull_s_cuts_to_families_w…
Made my job busier.
Thank Christ I'm on leave next week
So much whining about house affordability..Quit smoking, drinking or doing drugs.. Quit buying junk food and eating excessively or shacking up with people, having kids and divorcing..
Are people so stupid to think that you need to be 'rich' to negative gear ? The rich are the ones that can most likely afford to buy regardless. Furthermore, stifling negative gearing doesn't really help much because those who already are doing it can continue to do so on their existing properties. The 'rich' can easily create trust accounts, and shift equity into it, offsetting profits with further purchases that eat that up..
Those who can't afford houses in this current climate will just be effectively closing a door that they could have used to get on the ladder.. Further more, the rich will be the ones who can buy existing houses, knock them down, build a new house and negative gear that.
So much whining about house affordability..Quit smoking, drinking or doing drugs.. Quit buying junk food and eating excessively or shacking up with people, having kids and divorcing..
Got on the gravy train before house prices went pants-on-head retarded? Yes, lets beat up on people even though it's evident that numbers all scream that there has been a ridiculous rise in prices with a non-commensurate increase in wages.
"Get off my lawn you whippersnappers!"
/eyeroll
Are people so stupid to think that you need to be 'rich' to negative gear ? The rich are the ones that can most likely afford to buy houses regardless.
Allowing negative gearing incentivises buying property for investment purposes. i.e. increasing demand. It would make sense to do something if the housing market were actually flagging. However, at the mo, with absolutely rock bottom interest rates, people are artificially injecting a huge demand into the market simply to ride the wave of skyrocketing price (as appreciation+negative gearing benefits > interest rate payments).
So buy a bunch of houses with existing equity, pay interest only loans, flip houses once 12 months or more have elapsed to reduce capital gains. OMG such demand!
"Get off my lawn you whippersnappers!"
Quit smoking, drinking or doing drugs.. Quit buying junk food and eating excessively or shacking up with people, having kids and divorcing.. "Do that and you whippersnappers might be able to afford a lawn!"
Allowing negative gearing incentivises buying property for investment purposes.
Buying property has always been an investment in some form or another. Putting a roof over one's head is an investment in oneself. Otherwise the only other option would be to rent .. wait for it….which is someone else's investment…
So buy a bunch of houses with existing equity, pay interest only loans, flip houses once 12 months or more have elapsed >to reduce capital gains. OMG such demand!
After paying stamp duty, land tax, service fees, and the loss portion of the negative gear.. (because you surely know that negative gearing incurs a loss right), if all things go right and there happens to be a capital gain (which is not guaranteed) sure.. So explain how a poor person buys a house with no equity. Thats right… they either rent whilst saving money for a deposit or stay with their parents..Oh hold on how does one rent when there is no incentive to buy a property for investment purposes ?
@tony abbott: Yes but most of us made the decision when we were young and stupid. I agree that there are things that can help but unless you've smoked and tried to quit you should probably be more compassionate.