BUDGET 2015 - TAX CHANGES UPDATE
13 May 2015
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- Growing Jobs and Small Business — changes to the fringe benefits tax system for work‑related electronic devices. Currently, an FBT exemption can apply to more than one portable electronic device used primarily for work purposes, but only where the devices perform substantially different functions.
Removing the restriction that a tax exemption is only provided for one work‑related portable electronic device of each type will remove confusion where there is a function overlap between different products (such as between a tablet and a laptop).
- GST — applying to digital products and services imported by consumers. Under the current law, digital products and services imported by consumers are not subject to the GST. This results in forgone GST revenue to the States and Territories and places domestic businesses, which generally have to charge and remit GST on the digital products and services they provide, at a tax disadvantage compared to overseas businesses.
The GST was designed to apply to all products and services, except those specifically exempted, for example fresh food, health and education. This measure ensures that the GST applies to non‑exempted products and services, including digital supplies purchased from overseas and from Australia.
- GST — compliance programme — three year extension. The Government will provide $265.5 million to the Australian Taxation Office over three years from 2016‑17 to continue a range of activities to promote GST compliance.
Arrangements for funding these activities will be settled with the States and Territories in accordance with the GST Administration Performance Agreement.
- GST — not proceeding with a reverse charge for going concerns and farmland. The Government will not proceed with the previously announced but unenacted measure to replace the current GST‑free treatment for supplies of going concerns and farmland with a reverse charge mechanism. The Government had previously announced that it would proceed with the measure in December 2013.
- Income tax relief for Australian Defence Force personnel deployed overseas. The Government will provide income tax relief for Australian Defence Force personnel deployed on Operations AUGURY and HAWICK. A full income tax exemption will be provided to personnel on Operation AUGURY, and the overseas forces tax offset will be available to personnel on Operation HAWICK. This measure is estimated to have a negligible cost to revenue over the forward estimates period.
- Introducing a cap for salary sacrificed meal entertainment and entertainment facility leasing expenses. The Government will introduce a separate single grossed‑up cap of $5,000 for salary sacrificed meal entertainment and entertainment facility leasing expenses (meal entertainment benefits) for employees. Meal entertainment benefits exceeding the separate grossed‑up cap of $5,000 can also be counted in calculating whether an employee exceeds their existing fringe benefits tax (FBT) exemption or rebate cap. All use of meal entertainment benefits will become reportable.
Currently, employees of public benevolent institutions and health promotion charities have a standard $30,000 FBT exemption cap (this will be $31,177 for the first year of the measure, due to the Temporary Budget Repair Levy) and employees of public and not‑for‑profit hospitals and public ambulance services have a standard $17,000 FBT exemption cap (this will be $17,667 for the first year).
In addition to these FBT exemptions, these employees can salary sacrifice meal entertainment benefits with no FBT payable by the employer and without it being reported. Employees of rebatable not‑for‑profit organisations can also salary sacrifice meal entertainment benefits, but the employers only receive a partial FBT rebate, up to a standard $30,000 cap ($31,177 for the first year).
- Luxury car tax — exemption for cars acquired by endorsed public museums and public art galleries.
- Modernising the methods used for calculating work‑related car expense deductions. The Government will modernise the methods of calculating work‑related car expense deductions from the 2015‑16 income year. The '12 per cent of original value method' and the 'one‑third of actual expenses method', which are used by less than two per cent of those who claim work‑related car expenses, will be removed. The 'cents per kilometre method', will be modernised by replacing the three current rates based on engine size with one rate set at 66 cents per kilometre to apply for all motor vehicles, with the Commissioner of Taxation responsible for updating the rate in following years. The 'logbook method' of calculating expenses will be retained. These changes will not affect leasing and salary sacrifice arrangements.
- Personal income tax — removing an income tax exemption for government employees. The Government will remove an income tax exemption that is currently available to government employees who earn income while delivering Official Development Assistance overseas for more than 90 continuous days.