What The 2016-17 Budget Means For You
Are allegations that the latest Federal budget has let down those in the innovation industry justified? Read this article to find out.
On Tuesday 3 May, at 7.30pm, Treasurer Scott Morrison handed down the 2016-17 Budget. Matt Barrie, CEO of Freelancer, and Alex McCauley, CEO of StartupAUS, have labelled it an ‘election budget’ that has let down those looking for a strong signal of the government’s recent push of an innovation agenda. Perhaps, like Peter Martin at the Sydney Morning Herald, the more you look at it, the better it gets.
As a small business, there are several things you should take note of.
Small and medium businesses win.
Currently, from 1 July 2015, businesses that have an annual turnover of up to $2 million qualify for an income tax rate of 28.5%, down from the standard income tax rate of 30% for all businesses.
From 1 July 2016, businesses that have an annual turnover of up to $10 million (threshold increased by $8 million) will qualify for an income tax rate of 27.5% (further reduction of 1%).[table “” not found /]
The lower tax rate will gradually apply in the next few years to larger groups of businesses, till a standard 25% tax rate is reached by 2026-27.
If your business has an annual turnover of $2 million – $10 million, the benefits do not end here. Businesses with up to $10 million in annual turnover will also be able to access a range of concessions already available to businesses with under $2 million in annual turnover, including accelerated depreciation.
If you are a fintech enthusiast, it’ll please you to know that the government is putting $200,000 into promoting Australia as a global fintech destination over the next financial year. The impact of the campaign and ability to draw fintech businesses to Australia will be closely watched.
New initiative: Youth Jobs PaTH program.
The Budget reflects a commitment to helping people under 25, and currently on employment benefits, to get trained to enter the workforce. The cornerstone of this $725 million initiative is an internship program that helps youth job seekers get hands-on work experience.
The internship program will have 30,000 places available each year, to those who have been actively seeking employment for the previous six months. Interns will work between 15 to 25 hours a week, receiving an additional $200 per fortnight on top of the current welfare benefits they are receiving. Employers who take on an intern will get a $1,000 incentive, and those who hire the job seeker after the internship will be able to receive an accelerated wage subsidy of up to $10,000 paid over a six-month period.
Senator Michaelia Cash has confirmed that the first stage of the program, a three-week employability course, will be compulsory for youth job seekers after 5 months of receiving welfare, without detailing the consequences of failing to participate in it.
The Youth Jobs PaTH program has faced some backlash from the Labor opposition, the Greens and unions, who argue that this will lead to an exploitation of ‘free’ labour rather than facilitate the creation of real jobs.
Growing the entrepreneurial spirit
The New Enterprise Incentive Scheme (NEIS) will also be expanded. The current NEIS has a network of providers that provide small business training and business mentoring. At the same time, eligible people can get income support and rental assistance. Mentors and workshops will also be held around ‘Exploring Being My Own Boss’, helping people get a start as entrepreneurs.
The expansion will see an increase in the number of places available for people to participate in NEIS (6,300 to 8,600 (↑ 2,300)) and is being made available to recently retrenched workers.
Increased scrutiny in offshoring profits
A new Australian Diverted Profits Tax has been announced, imposing a 40% penalty tax rate on multinational companies that shift their profits overseas through related third party arrangements. $679 million has also been allocated to the Australian Taxation Office to establish a Tax Avoidance Taskforce to combat tax avoidance by businesses, multinationals and high net-wealth individuals.
Let us know your thoughts on the Budget by tagging us #lawpath or @lawpath.
Shaun, our resident legal engineer, recently returned to us after completing a clerkship at one of Australia’s top-tier commercial law firms. He is passionate about emerging technologies, and their potential application to the legal profession.