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Federal Budget 2014/15 - Business

May 2014

The good news for business is that the decrease in the company tax rate from 1 July 2015 is safe for now.  The bad news is that there are a series of other costs to contend with as well as superannuation considerations to make.

Company tax rate reduction remains
The Government will go ahead with the scheduled reduction in the company tax rate by 1.5% from 1 July 2015. For large companies, the reduction will offset the cost of the Government's Paid Parental Leave levy. 

Fringe Benefits Tax rate increase
Effective: 1 April 2015 

Tying in with the 2% debt tax (see Individuals), the Government has announced that the FBT rate will increase from 47% to 49% from 1 April 2015 until 31 March 2017 to prevent high income earners trying to avoid the levy.

The problem is if you run a business and you are not trying to avoid the debt tax, you're going to pay more in FBT regardless. 

The cash value of benefits received by employees of public benevolent institutions and health promotion charities, public and not-for-profit hospitals, public ambulance services and certain other tax-exempt entities will be protected by increasing the annual FBT caps. In addition, the fringe benefits rebate rate will be aligned with the FBT rate from 1 April 2015.

Fuel indexation and other measures
Effective: 1 August 2014 for all fuels except aviation fuels 

As widely predicted, indexation of the fuel excise levy will resume, generating $2.2bn over the next 4 years. The indexation of fuel excise is being spent on a wide array of infrastructure projects. 

Bi-annual indexation by the CPI of excise and excise-equivalent customs duty will resume again on 1 August 2014. Aviation fuels are excluded.

Tax treatment of biodiesel change
Effective: 1 July 2015 

Grants made under the Cleaner Fuels Grant Scheme will be reduced to zero and the excise on biodiesel will also be reduced to zero from 1 July 2015.

From 1 July 2016, the excise rate for biodiesel will be increased for five years until it reaches 50% of the energy content equivalent tax rate. The excise equivalent customs duty for imported biodiesel will continue to be taxed at the full energy content equivalent tax rate.

Product Stewardship for Oil (PSO) levy increase
Effective: 1 July 2014

The PSO is aimed at supporting environmentally sustainable management of used oil including: the recycling of used oil, and use of the recycled product.

The levy rate will increase to 8.5 cents per litre of grease from 1 July 2014.  The rate of the benefit for Category 8 oils (Category 8 benefits provide a mechanism to refund levies paid on oils that are being put to particular uses) will also be increased to ensure it continues to match the rate of the levy.

R&D incentives cut back
Effective: 1 July 2014

From 1 July 2014, the refundable and non-refundable offsets for the Research & Development Tax Incentive will be reduced by 1.5%. This means the refundable offset will be reduced to 43.5% while the non-refundable offset will be reduced to 38.5%.

Interestingly, the Government has said that reducing the R&D tax offset rates is consistent with the Government's commitment to cut the company tax rate by 1.5%. However, the reduction in the company tax rate is not meant to occur until 1 July 2015.

Businesses that are undertaking R&D activities this year may want to consider bringing forward expenditure to ensure they maximise their claims for the year ending 30 June 2014 to take advantage of the higher tax offset rates.

Government initiatives and programs for business

Incentives for employing workers over 50
Effective: 1 July 2014

From 1 July 2014, a payment of up to $10,000 will be available to employers who hire a mature age job seeker (including those on the Disability Support Pension) aged 50 years or over who has been receiving income support for at least six months.

Payments will start after the worker has been employed for at least 6 months and paid in instalments:
  • $3,000 after 6 months of employment;
  • $3,000 after 12 months of employment; 
  • $2,000 after 18 months of employment; and 
  • $2,000 after 24 months of employment. 

Aged care providers lose payroll tax subsidy
The Payroll Tax Supplement payments to eligible residential aged care providers will cease from 1 January 2015.

International tourism incentives
The Government is providing $43.1m over 4 years to implement a new Tourism Demand Driver Infrastructure grants program.  

Small agricultural exporters
Effective: From 2014/2015 income year

$15m has been set aside over 4 years for small exporters in sectors where there are specific export certification registration charges.  Funding will be provided in 2014/2015 to provide eligible small exporters with a 50% rebate of their export certification registration costs, up to a maximum of $5,000. 

From 2015/2016, funding will be provided for projects that directly benefit small exporters, particularly projects to improve market access.

Consolidation of support services for innovation
Effective: 1 January 2015

A raft of councils and support services to nurture innovation and enterprise have been abolished and replaced with the Entrepreneurs' Infrastructure Programme through the Department of Industry.  From 1 January 2015, The Entrepreneurs' Infrastructure Programme will replace:
  • Australian Industry Participation;
  • Commercialisation Australia;
  • Enterprise Solutions;
  • Innovation Investment Fund;
  • Industry Innovation Councils;
  • Enterprise Connect;
  • Industry Innovation Precincts; and
  • Textile, Clothing and Footwear Small Business and Building Innovative Capability.

Consolidation of support services for industry skills
Effective: 1 January 2015

The Industry Skills Fund (ISF) will replace a raft of skills training from 1 January 2015.  The ISF will target the training needs of SMEs in health and biomedical products; mining, oil and gas equipment technology and services; and advanced manufacturing, including defence and aerospace.  

Business will need to make co-contributions to the cost of the skills training on a sliding scale depending on the size of the business.  The ISF will replace:
  • National Partnership Agreement on Training Places for Single Parents;
  • Accelerated Australian Apprenticeships Programme;
  • Australian Apprenticeships Mentoring Programme;
  • National Workforce Development Fund;
  • Workplace English Language and Literacy Programme;
  • Alternative Pathways Programme;
  • Apprenticeship to Business Owner Programme;
  • Productive Ageing through Community Education;
  • Australian Apprenticeships Access Programme; and
  • Step Into Skills Programme
For more information about how the Federal Budget affects you and your business, please contact us on 02 9957 4033 or via our contact form

More reading

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Last updated May 2014. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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