Treasury: Investing in Regional Growth—2016-17

The Treasury portfolio, through the Australian Taxation Office, administers a range of subsidies and personal benefits. These initiatives are not designed specifically for regional or urban areas, but rather to assist people and organisations that satisfy the eligibility criteria regardless of their location. The Treasury also administers payments to State and Territory governments under the federal financial relations framework.

Further details are provided in the Treasury Portfolio Budget Statement.

New Initiatives

Ten Year Enterprise Tax Plan—Targeted Personal Income Tax Relief

The Government will increase the 32.5 per cent personal income tax threshold from $80,000 to $87,000 from 1 July 2016.

This measure will reduce the marginal rate of tax on incomes between $80,000 and $87,000 from 37 per cent to 32.5 per cent, preventing around 500,000 taxpayers facing the 37 per cent marginal tax rate. This will ensure that the average full-time wage earner will not move into the second highest tax bracket in the next three years. In the absence of this action, they would move into the second highest tax bracket in 2016-17.

Personal income tax—Increasing the Medicare Levy Low-Income Thresholds

The Government will increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners from the 2015-16 income year. The increases take account of movements in the Consumer Price Index so that low income taxpayers generally continue to be exempted from paying the Medicare levy.

The threshold for singles will be increased to $21,335. For couples with no children, the threshold will be increased to $36,001 and the additional amount of threshold for each dependent child or student will be increased to $3,306. For single seniors and pensioners, the threshold will be increased to $33,738. For senior and pensioner couples with no children, the threshold will be increased to $46,966 and the additional amount of threshold for each dependent child or student will be increased to $3,306.

Ten Year Enterprise Tax Plan—Excise Refund Scheme for Distillers

The Government will extend the current brewery refund scheme to domestic distilleries and producers of low strength fermented beverages such as non-traditional cider from 1 July 2017. The scheme will not be extended to most alcopops producers (that is, those that merely purchase the spirits and add the soda and other flavours), nor wine which benefits from the Wine Equalisation Tax rebate.

This measure forms part of the Government's Ten Year Enterprise Tax Plan, which will encourage Australians to work, save and invest.

Ten Year Enterprise Tax Plan—Wine Equalisation Tax Rebate Integrity and Wine Tourism Funding

The Government will address integrity concerns with the Wine Equalisation Tax (WET) rebate by reducing the WET rebate cap and tightening eligibility criteria.

The Government will reduce the WET rebate cap from $500,000 to $350,000 on 1 July 2017 and to $290,000 on 1 July 2018 and introduce tightened eligibility criteria which will apply from 1 July 2019. This measure will better target assistance and reduce distortions in the wine industry.

The Government will also provide $50.0 million over four years to the Australian Grape and Wine Authority to promote wine tourism within Australia and Australian wine overseas to benefit regional wine producing communities.

This measure forms part of the Government's Ten Year Enterprise Tax Plan, which will encourage Australians to work, save and invest.

Ten Year Enterprise Tax Plan—Increase the Small Business Entity Turnover Threshold

The Government will increase the small business entity turnover threshold from $2 million to $10 million from 1 July 2016. The current $2 million turnover threshold will be retained for access to the small business capital gains tax concessions, and access to the unincorporated small business tax discount will be limited to entities with turnover less than $5 million. An additional 90,000 to 100,000 business entities will gain access to the small business concessions, such as the lower small business corporate tax rate, accelerated depreciation and depreciation pooling provisions.

This measure forms part of the Government's Ten Year Enterprise Tax Plan, which will encourage Australians to work, save and invest.

Ten Year Enterprise Tax Plan—Increase the Unincorporated Small Business Tax Discount

The Government will increase the tax discount for unincorporated small businesses incrementally over 10 years from 5 per cent to 16 per cent. The tax discount will increase to 8 per cent on 1 July 2016, remain constant at 8 per cent for eight years, then increase to 10 per cent in 2024-25, 13 per cent in 2025-26 and reach a new permanent discount of 16 per cent in 2026-27. This will coincide with staggered cuts in the corporate tax rate to 25 per cent. The current cap of $1,000 per individual for each income year will be retained.

The tax discount applies to the income tax payable on the business income received from an unincorporated small business entity. Access to the discount will be extended to individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $5 million.

This measure forms part of the Government's Ten Year Enterprise Tax Plan, which will encourage Australians to work, save and invest.

National Innovation and Science Agenda—Expanding Tax Incentives for Early Stage Investors

This measure forms part of the Government's commitment to ensuring early-stage innovative companies have access to investment capital.

The Government has amended the Mid-Year Economic and Fiscal Outlook 2015-16 measure National Innovation and Science Agenda—tax incentives for angel investors to:

  • reduce the holding period from three years to 12 months for investors to access the 10 year capital gains tax exemption;
  • include in the definition of eligible startups, a time limit on incorporation and criteria for determining if the startup is an innovation company;
  • require that the investor and innovation company are non-affiliates; and
  • limit the investment amount for non-sophisticated investors to $50,000 or less per income year in order to receive a tax offset.

These amendments have been determined in close consultation with stakeholders and will better target the incentives to ensure they promote investment in the early-stage innovation companies. These companies face difficulty attracting the capital and business expertise needed to succeed.

National Innovation and Science Agenda—Expanding the New Arrangements for Venture Capital Limited Partnerships

This measure expands the funding arrangements to attract more venture capital investment.

The Government has amended the Mid-Year Economic and Fiscal Outlook 2015-16 measure National Innovation and Science Agenda—new arrangement for venture capital investment to:

  • add a transitional arrangement that allows conditionally registered funds that become unconditionally registered after 7 December 2015 to access the tax offset if the criteria are met;
  • relax the requirement for very small entities to provide an auditors' statement of assets;
  • extend the increase in fund size from $100 million to $200 million for new early-stage venture capital limited partnerships (ESVCLPs) to also apply to existing ESVCLPs; and
  • ensure that the venture capital tax concessions are available for FinTech, banking and insurance related activities.

These amendments have been determined in close consultation with stakeholders and will better improve access to capital and make the regimes more user-friendly.

Norfolk Island—Capital Gains Tax Exemption

On 23 October 2015, the Australian Government announced it would provide a full capital gains tax exemption on assets held by Norfolk Island residents prior to 24 October 2015. This exemption applies to those assets that were exempt from capital gains tax before Norfolk Island was fully brought within Australia's income tax system, due to the holder's Norfolk Island residency. These assets will continue to be exempt until a capital gains tax event first happens (for example the asset is sold or disposed of). Once an exempt asset has been sold or disposed of, this exemption will no longer apply, however other exemptions, such as the main residence exemption, may be applicable. The measure is estimated to have a negligible cost to revenue over the forward estimates period.

The measure will significantly assist the Norfolk Island community in transitioning into Australia's mainstream taxation system, which is part of the Government's election commitment to introduce taxation, social security and healthcare arrangements on Norfolk Island effective from 1 July 2016.

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Current Initiatives

Tax Averaging for Primary Producers—Allowing Re-access

Tax averaging allows primary producers to smooth out their income tax liability. Currently a primary producer may opt-out of tax averaging, but is not able to access the scheme again.

The Government will allow primary producers to re-access tax averaging ten years after the year in which they chose to opt out. The measure will apply to all primary producers, including those that had previously opted out. This measure is estimated to have an unquantifiable cost to revenue over the forward estimates period. Legislation giving effect to this measure is yet to be passed by Parliament.

This measure forms part of the Government's Agricultural Competitiveness White Paper.

Strengthening the Foreign Investment Framework

The Australian Government has delivered on its commitment to strengthen Australia's foreign investment rules for residential real estate and agricultural investments.

The screening threshold for agricultural land was lowered from $252 million to $15 million (applied cumulatively) on 1 March 2015. Direct interests in agribusinesses valued at $55 million or more are now also screened by the Foreign Investment Review Board. Transparency has also been improved. Foreign persons with an interest in agricultural land have been required to register that interest on the Australian Taxation Office Agricultural Land Register since 1 July 2015.

In addition to the changes, the Australian Government is also committed to improving transparency around foreign ownership of water entitlements. The Australian Government will introduce legislation for the establishment of a register of foreign ownership of water entitlements before 1 December 2016.

Australian Small Business and Family Enterprise Ombudsman

The Australian Small Business and Family Enterprise Ombudsman commenced on 11 March 2016 and is a Commonwealth-wide advocate for small businesses and family enterprises. The Ombudsman helps small businesses access the independent support and advice they need to resolve disputes without resorting to costly litigation, contributes to the development of small business-friendly Commonwealth laws and regulation, and works with States and Territories in the development of national strategies.

The Ombudsman works with existing services to ensure small businesses access the services best placed to help them while avoiding unnecessary duplication. The Ombudsman also seamlessly links with business.gov.au to help small businesses easily connect with Government services, advice and programmes.

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