Commentary

The Budget forecasts show the economy is still limping along:  barely able to absorb new workers, interest rates at lows not seen for over 25 years, slow wage growth (which constrains household spending), and investment weak and declining due to low business confidence.

The 2015 Budget won't turn this state around.  This budget will have a roughly neutral fiscal impact on the aggregate demand for services and goods.  The economy is periodically buffeted by large swings in commodity prices, like iron ore and coal, and these are a key driver of the budget balance.

As the largest brake on the economy is the low level of business and consumer confidence (eg., little response to the eight interest rate cuts between 2011 and 2014), this budget needed to be less controversial, which could lift confidence.  So, the emphasis is on the commitment to long-term fiscal repair and a hope for a pick-up in commodity volumes and prices.

Analysis

Most of the detail is an interesting read, and if you'd like a summary of Winners & Losers we have a good Infographic we can pass on to you (prepared by Edith Cowan University), and a full analysis of every measure by Hayes Knight Accountants.

What I will provide here is just the key issues for businesses (with turnover under $2m, which represents 93% of all businesses).

Small Business (Turnover less than $2m)

From 1 July 2015 -

- Company tax rate reduced to 28.5% (from 30.0%)

- But the Franking Credit rate remains at 30%

- An individual receiving business income, as a sole trader, partner, or trust beneficiary, will receive a 5% discount on tax payable on the business income, up to $1,000.

Immediate Write-Off

- From 12 May 2015 to 30 June 2017 -

- Immediate write-off for all items costing less than $20,000, to be claimed in the year it is installed or ready for use

- The existing small item depreciation pool (where all plant etc., is lumped together and depreciated over 3 years) can be written off immediately when the value in the pool falls below $20,000

- If starting a new business, costs of legals, incorporation, and other professional advice can be written off immediately (at present over 5 years).

Primary Producers

From 1 July 2016 -

- Claim immediate deduction for water facilities and fencing (currently 30 years)

- Depreciate over three years expenditure on fodder storage (currently 50 years)

Other Measures

From 1 July 2015 -

- Car expenses can be claimed under the log book method or at the 66 ¢ per km rate (dropping the 12% of vehicle cost and 30% of actual expenses methods)

- FTB(A) and subsidised child care are only available if immunisation is up-to-date

- A new online portal to be available around mid-2016, for streamlining of access to government regulatory bodies

- Small business entities can change legal structure once without attracting CGT (from 2016/17)

- Penalties on SMSF trustees increase slightly, but no other changes to superannuation

- No changes to Negative Gearing

- Allocation of more funds to the ATO to check GST compliance and locate and prosecute fraud (particularly in superannuation, identity theft, and tax evasion).