The projected 10 year delay to a material reduction in the corporate tax rate continues the present Government’s disappointing record on economic reform, compounded by a substantial increase in red tape for cross border dealings.

The most positive measure is the progressive expansion of the concessional corporate rate beyond the $2m micro business to SME’s more broadly, though this is partly negated by the removing the ability to frank dividends at the general 30% rate.

The Budget requires considerable attention and action for a broad range of large and small businesses, and superannuants generally.

In our insight into the Federal Budget, the Gadens tax team highlight below the key implications of the Budget measures for you and your business. 

International dealings

The current trend of tax shaming and political reaction to perceived abuse continues with extensive new measures and increased ATO powers that apply far beyond the practices of tech giants like Google or individuals engaging Panamanian lawyers.

Thousands of Australian entities which are part of significant global businesses will now need to re-assess their dealings with related parties in jurisdictions that have a tax rate 80% lower than Australia’s. Australian entities will also need to re-assess any international funding structures that are not recognised consistently by Australia and the foreign jurisdiction.

On a positive note, fund managers can begin preparing for the belated introduction of standard international collective investment vehicles which will boost the relative attractiveness of Australia to foreign capital. 

Business structure opportunities

Whilst diminishing the value of super funds, the Budget continues the ascendancy of the classic discretionary trust / corporate beneficiary structure.  There is a strategic opportunity to benefit from proposed improved access to corporate funds in the structure, as well using corrective mechanisms to deal with skeletons.

There is enhanced opportunity to shelter up to $10m business income next year at the concessional corporate rate of 27.5%, which will progressively be expanded to attract the whole SME sector in future.

Retailers and distributors will be excited that the Treasurer has adopted his predecessor’s “tradie’s write-off” and invited all corporates with less than $10m income to claim the instant $20k deduction.

Redefining and restructuring your super arrangements

We now have a significant overhaul of the superannuation system which merits a considered retirement planning review.

The Budget has shut the gate on the ability to rapidly build significant capital that can earn non-taxable income in your self-managed super fund (SMSF), as well as reducing both the amount of concessional contributions and the level at which additional contributions tax is imposed.

Individual members now have little more than 12 months to restructure their existing superannuation arrangements and contribution plans.  This is particularly required to deal with the retrospective application of the new limit of $1.6m non-taxable capital for those members who have successfully accumulated more than this amount.

SMSF members will also need to consider their asset investment strategy and limited recourse loan arrangements given the changes to contribution limits and level of deductible contributions.On a positive note, the retirement planning review can also incorporate the opportunity to make concessional contributions up to the age of 75 without a work test, as well as utilise unused concessional contribution limits from the previous five years.