The only constant with our tax system is that it is ALWAYS CHANGING. With the new Federal Budget comes a bunch of changes, which may or may not affect your small business. Let’s take a look…
Superannuation Going Up
The “Superannuation Guarantee” (compulsory super contributions) was always meant to change from 9.25% to 9.5% on the 1st July and this is still happening – this change will not be changing. Apparently we are also still aiming for 12%, but the “schedule” has changed so that the (new) rate of 9.5% will remain fixed until 30th June 2018. It is supposed to then resume increasing by 0.5% every year after that. So far, we’ve only had the rate increase once (twice, if you include the change that’s about to happen) and the politicians have already fiddled with it, so let’s not be too surprised if this changes again NEXT year…
Will you need to update your accounting system or is it something like eLEDGER, which will automatically update this sort of thing for you, behind the scenes?
Deficit Levy Coming In
Starting on the 1st July will be yet another new tax – the (apparently three year) “Deficit Levy” will be imposed on anyone earning over $180,000 (per annum) at a rate of 2% (of each dollar you earn over $180k). So for example:
- You make $200,000 – you pay an extra $400 (2% of $20,000)
- You make $300,000 – you pay an extra $2,400 (2% of $120,000)
This could affect small businesses operating as Sole Traders and Partnerships, like husbands and wives or a couple of mates who have started a business together and reinvest their profits into their business – if you haven’t already done so, you may need to review your salary packaging arrangements to keep those salaries under the $180,000 threshold.
Be careful with those salary packages – the government is also increasing the Fringe Benefits Tax rate to 49% on 1st April, 2015 (it already increased to 47% on April Fools Day, this year) so you may well be better off paying the 2% instead of creating a salary package which triggers the FBT!
Fuel Excise Going Up
In 2001 the government had cut the Fuel Excise Levy by 1.5c and frozen it “in perpetuity” at a rate of 38c per litre. The unfreezing of this federal excise will increase petrol prices twice a year in line with inflation, from 1st August 2014. It is expected to add around 2c per litre to the cost of fuel and keep going up from there. The Prime Minister recently admitted this is essentially the new government’s version of a “Carbon Tax”.
If your business is heavily reliant on company vehicles (which use petrol) then this could hit quite hard – it will certainly add to the already high cost of fuel you are paying, now.
Some Fiddling Around the Edges
The Medicare Levy will also be going up, from 1.5% to 2%,
on 1st July. As with changes to Super, you may need to update your accounting system if you aren’t using something like eLEDGER, which automatically makes these changes for you.
R&D Tax Concessions will be going down by 1.5% – that’s less money to help you develop your product.
- refundable offset will be 43.5%
- non-refundable offset will be 38.5%
The Dependent Spouse Offset will be gone, as will the Mature Age Worker Offset – which will be replaced by a new incentive scheme called “Restart”. Details of this new scheme are a little thin on the ground at the moment, beyond that it will be “up to $10,000 to employers who hire a job seeker aged 50 or more who has been on income support for at least six months.” The Dependent Carer Offset will increase to a maximum of $2,535 per dependent.
Strictly speaking not a budget/tax decision, but the Fair Work Commission also recently announced its Wage Review, which will also come into effect 1st July. Notably the Minimum Wage will be increased from $16.37 per hour ($622.20 per week) to $16.87 per hour ($640.90 per week) – basically an extra 50c per hour. Leave loading will also be reduced from 75% to 50% on Sundays for (casual) bar, café and restaurant workers, starting in July. Other casual staff will be unaffected.
So… Are you going to have to madly scramble to rethink how you run your business – and possibly do that whole “Please Wait While New Updates Are Downloaded” thing with your accounting system – or are you going to be able to carry on, “business as usual” when this Financial Year ends and another one begins? To be fair, this year’s changes are relatively minor compared to some from past years – although there’s still the spectre of messing about with the GST looming in the shadows…