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INCOME TAX RATE CHANGES

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From 1 July 2016

  • INDIVIDUALS

The threshold at which the 37% marginal tax rate for individuals commences will increase from taxable incomes of $80,000 to $87,000. This measure reduces the marginal income tax rate on taxable incomes between $80,000 and $87,000 from 37% to 32.5% from the 2016/17 income year. This will have a flow on, positive, effect to taxpayers on higher incomes too.

The 2% Budget Deficit Levy will cease as planned at 30 June 2017.

  • COMPANIES

The company tax rate for “small business entities carrying on a business” will be progressively reduced to 25% over 10 years.

  • SMALL BUSINESS

The definition for what constitutes a small business will change. The small business entity turnover threshold will be increased from $2m to $10m from 1 July 2016. The increased threshold means businesses with an annual turnover of less than $10m will be able to access existing small business income tax concessions.

The increased $10m threshold will not be applicable for accessing the small business capital gains tax concessions.

The unincorporated small business tax discount will be increased in phases over 10 years from the current 5% to 16%. First increasing to 8% on 1 July 2016, the discount will be available to individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $5m (also an increase from the current small business turnover threshold of less than $2m). The existing cap of $1,000 per individual for each income year will be retained.

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