Peninsula Partners Accountants

2015 Budget Review

The second Tuesday in May is a great night for accountants, journalists and insomniacs.  Each year, the treasurer brings down the budget, and each year, Peninsula Partners brings you a light hearted, plain English but still informative summary of its content.

2014 was a disastrous budget for the Liberal government, with poor political fallout from policies that seemed to attack pensioners and the sick whilst rewarding high income earners taking maternity leave.  Throw in a poorly timed cigar smoking session, and it wasn't Joe Hockey's greatest night.

It seems some lessons have been learnt on the political front (for example, $3 billion has been "spent" abandoning the $7 GP payment), but what does it achieve from an economic point of view, which after all is the main purpose of the budget.

Part one of my budget review looks at who will benefit most from the budget, and who will be worse off, so here's a quick snapshot:


1. Small business owners

The company tax rate will drop from 30% to 28.5%, but many small businesses are set up as sole traders or family trusts.  These businesses will receive a 5% tax cut, capped at $1,000.  The one from left field was the immediate deduction of purchases up to $20,000.  This applies to every purchase, not in total, so if you buy 5 laptops for your business at $2,000 each, you can instantly tax deduct $10,000 rather than claim $3,333 per year for three years.  And if you're planning on buying a few Hyundai Getz cars, it's your lucky day! 

Furthermore, it is effective as of now and claimable in the 2015 financial year.  Think I might buy some shares in JB Hi Fi...

2. Working parents with young children

Mums and dads...get back to work!  Child care benefits used to capped if the family earned less than $185,000 but this will no longer be the case.  If you're lucky enough to earn more than this, your child care rebate cap grows from $7,500 to $10,000.  You do have to immunise your child to qualify.

3. People with healthy superannuation balances

"There will be no new taxes on superannuation under this government".  A bold statement, given scaling back some of the enormous superannuation tax savings the wealthy are currently entitled to seemed like such a big opportunity for additional government revenue.  At the moment, a retired person that earns $150,000 from term deposits, dividends and rent through their superannuation can pay no tax, whereas that same income for a salary and wage earner would have to pay $46,434!

Here's the advertisement folks - if you want to set up your own suerannuation fund, feel free to drop me a line...


1. New parents

Talk about an about face!  Last year, Tony Abbott tried to introduce the widely unpopular paid parental scheme where the government would pay new parents up to 6 months of their pre-existing salary.  It didn't get off the ground (and therefore represents a budget "saving" in 2016).  This year, not only is this not happening, but if your employer pays maternity leave (as most do), the current 18 weeks of the minimum wage is being withdrawn. 

I'm now even happier to have become a dad in the 2015 financial year.  And watch out for a big run on caeserian sections over the next six weeks!

2. Mid wealth pensioners

The level of asset ownership a pensioner can have (on top of their own home) will increase before the pension starts to reduce, but those at the top end will see their entitlements reduce.  Currently, a part pension can still be received by individuals with assets of $800k, and couples with $1.2m (on top of their own home), so the policy is clearly a rebalancing to those that in greater need.

3. Greater tax policing

Branded as "Fairness in Tax and Benefits", this will be a multi pronged program (ATO, Centrelink and government tax law) designed to boost tax revenues and reduce welfare payments.  How?  Here's a summary:

  • The "Netflix Tax" will mean overseas based online businesses will have to pay GST on their income sourced in Australia.   90c out of the $9.95 per month Netflix charges will go to the government.  Internet pirates still receive a 100% discount.
  • The ATO will continue to invest in data matching and software programs designed to catch those that declare income of $20,000 and drive a Bentley.  That may sound glib, but it is working, with the ATO finding an investigating more irregularites than ever before. 
  • If you have a HECS / HELP debt but are living overseas, from next year you'll have to re-commence paying it back
  • If you're here on a working holiday visa and working by picking fruit in Red Hill or elsewhere on the Mornington Peninsula and beyond, you no longer have a tax free threshold, meaning less in your back pocket

4. Carlton

Nothing was mentioned of the Carlton Football club in the bdget, but they belong in the losers section anyway.

Stay tuned for part 2 of the Peninsua Partners budget review where we look at the key assumptions that underpin the numbers, and what it means not only for Australia, but also for you, your family and your business.  Due out over the weekend.