The 2015 Federal Budget has now been announced. We have summarised below the key changes that will be specifically relevant to you as a doctor.
Many have commented this is a budget made by politicians worried about keeping their jobs, and as such is quite benign compared to last year. Also, remember that changes to legislation may not get passed in the senate, so may not happen at all.
The key changes within the budget of potential relevance to you as a doctor are:
Taxation for small business (including locums and self-employed doctors)
Reduction of the company tax rate for businesses with annual turnover of less than $2 million from 30% to 28.5%, from 1 July 2015.
For unincorporated small businesses, such as sole traders working under an ABN, a 5% tax discount will be available for individuals with business income. This will be capped at $1,000 per person.
The threshold for which small businesses can claim an immediate deduction for asset purchases increases to $20,000 from $1,000. This will apply immediately for the current year and for the next two financial years.
Small businesses can change the legal structure of their business without attracting capital gains tax from 1 July 2016.
This is represents a small tax saving for locum and self-employed doctors. The most common structure for self-employed / locum doctors is as sole traders through an ABN, which means that the 5% tax discount would apply. However, as it is capped at $1,000, this is the maximum tax benefit from this.
High income earners levy still around
A 2% levy continues to apply to those earning an income above $180,000. The impost is for three years only from 1 July 2014 to 30 June 2017 and means that those earning above $180,000 will pay the extra 2% levy on all income in excess of $180,000.
That is, if you are earning $200,000 you will be faced with an additional 2% on $20,000 – a total levy of $400, or if you are earning $300,000 you will be paying a 2% impost on $120,000 – or $2400.
We hope that the government stays true to its word and reduces this additional tax from 2017.
Salary packaging, salary sacrifice to superannuation, and negative gearing for investment property purchase will continue to be useful strategies to reduce taxable income. Salary sacrifice to superannuation becomes slightly more attractive given that contributions are generally taxed at a maximum of 15%, compared to these higher marginal tax rates.
Salary Packaging changes
A cap of $5,000 on salary sacrificed meal and entertainment benefits. Though not specified, this will likely be from the year commencing April 1st, 2016. This is relevant for some employees working for example, at the Mater where the Meals and Entertainment Card is available. No changes to the Queensland Health salary packaging allowances is anticipated at this stage.
No more extra value will be created by salary packaging huge wedding receptions or big group dinners…
GST to apply to Netflix
The GST will be extended to include offshore suppliers of intangibles and services to Australian consumers. This will result in GST being charged on digital products obtained from overseas vendors. This will include such items as video streaming services, e-books and music downloads
Paid Parental Scheme
Access to the government’s parental leave scheme will be removed for those employees who have access to employer provided leave entitlements.
Overall, our view at Doctors Wealth is that most doctors will be neutral or slightly better off under the proposed budget, based on the above changes.
As with any change in the legislation, there are often strategies to make the most of the changes, and even emerge in a better financial position than before.
Please feel free to contact us on (07) 32528810 to make an obligation free appointment with one of our advice and accounting team.