The impact of the Budget on most businesses will be minimal. The company tax rate will be reduced by 1.5% on 1 July 2015 for small companies. Compulsory superannuation contributions will increase by 0.25% on 1 July 2014 but future increases have been deferred. In the longer term, businesses will be encouraged to create positions for older and younger workers as the government's carrot and stick approach to reducing welfare payments takes effect.
Company tax rate
From 1 July 2015 the company tax rate will be reduced to 28.5% for companies with taxable incomes under $5 million. For companies with taxable income over $5 million, a 1.5% levy will be applied to pay for the Paid Parental Leave Scheme, effectively leaving the tax rate at 30%.
It is expected that the dividend franking credit will also be reduced to 28.5% for all companies.
Mature aged worker tax offset removed
This offset, which was used to encourage older workers to keep working, will be abolished from 1 July 2014. It will be replaced with direct subsidies to employers, as discussed below.
$10,000 incentive to employers for older workers
As an incentive to employ over 50s who have been unemployed for greater than 6 months, a $10,000 subsidy will be available to employers. The scheme, entitled Restart, applies where a worker over 50 is taken off benefits and given employment. It does not apply to retirees re-entering the workforce. $3,000 will be paid on first hiring the worker, $3,000 after 12 months and further payments of $2,000 after 18 and 24 months.
Disincentives for under 30s to be unemployed
Access to the Newstart allowance and Youth allowance will be affected by a 6 month waiting period. Those under 24 will not be eligible for Newstart at all after 1 January 2015. This will potentially add to the number of applicants for job vacancies.
Paid Parental Leave Scheme retained
From 1 July 2015, new mothers will receive up to 26 weeks pay during maternity leave, funded by the government. The maximum salary is $100,000 per annum, translating to a maximum payment of $50,000.
Changes to the Superannuation Guarantee Charge increases
The current law will see the rate go from 9.25% to 9.5% on 1 July 2014. The rate will then be held at 9.5% for four years, and then annual 0.5% increases will be introduced until the target of 12% is reached.
Fringe Benefits Tax rate to 49% from 1 April 2015
The top marginal rate of tax will increase by 2% due to the Temporary Budget Repair Levy from 1 July 2014. At the same time the Medicare Levy is due to increase to 2%, leaving the new top marginal tax rate at 49% (45% + 2% Budget levy + 2% Medicare levy).
To prevent employees packaging benefits via their employers, the FBT rate will be adjusted from 47% to 49% to match the increase in the top marginal rate.
For employees of public hospitals and public benevolent institutions, the existing caps of $17,000 and $30,000 for grossed up taxable values of benefits will be increased to maintain the cash value of the benefits provided.
For public hospitals and public benevolent institutions, the FBT treatment of packaged expenses and meal benefits has not changed. Exemptions available to these employers are generous and are widely promoted by salary packaging companies. Suggested reforms to limit the packaged benefits have not been addressed in this Budget.
Pension age increases to 70 for people born after 1965
The pool of available senior workers will increase after 2025 as aged pension eligibility is progressively increased from 67 to 70. This provides further incentive to work towards becoming a self funded retiree.
Fuel excise indexation re-introduced
Fuel excise will be adjusted according to the CPI twice yearly, increasing the cost of fuel for all road users. The excise will be directed to building and upgrading road infrastructure.
R&D tax incentive reduced
The current 45% refundable tax offset for R&D (and 40% non refundable offset for companies larger than $20m turnover) will be reduced by 1.5%, in proportion with the reduction in the company tax rate. This will take effect from 1 July 2014, one year ahead of the corresponding reduction in the company tax rate.
ATO staff reduced
The intention to reduce 4,700 positions at the ATO was announced by the former government; this will now be brought forward with 1,600 positions that were scheduled to be removed in 2016 now being targeted in 2015.
Data matching scheme deferred
Proposed legislation to support third party reporting of sales information has been deferred until 1 July 2016. This reporting scheme would involve data matching of real estate sales, share sales, government grants and merchant's debit/credit card records. The original proposed start date was 1 July 2014.
Uncertainty over the small business write off threshold
The government's intention to remove the $6,500 first year write off for new assets has not been passed by the Senate and was not covered by the Budget announcements. The changes were to apply from 1 January 2014 and would see the former $1,000 threshold reinstated. Similarly the additional $5,000 write off for new vehicles remains in law although the government's intention was to remove this incentive from 1 January 2014.
The status of this is uncertain but until legislation is passed to remove these provisions they remain as law.