Australia

Details

  • Service: Tax, Corporate Tax, Topics, Federal Budget
  • Industry: Financial Services
  • Type: Regulatory update
  • Date: 19/05/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Peter Oliver

Peter Oliver
Partner, Tax

+61 2 9455 9520

peteroliver@kpmg.com.au

Corporate tax rate and PPL changes: what will it mean? 

by Peter Oliver, Financial Services Specialist

With many Budget measures attracting press headlines, one change that has received less scrutiny is the proposed reduction in the corporate tax rate to 28.5 percent for income years commencing on or after 1 July 2015.

As companies will be subject to a new paid parental scheme levy (PPL) of 1.5 percent on taxable income in excess of $5 million, some may think there is no significant change overall. Nonetheless, there are a number of issues that need careful consideration:

 

  • Transitional dividend/franking issues will arise given the PPL is not expected to generate franking credits. From 1 July 2015, greater profit levels will be needed to distribute carried-forward franking balances. Is there scope for increasing franking levels before the change?
  • The income tax rate reduction will only impact tax-effect accounting following substantive enactment of the legislation. It appears this may not occur until after 30 June 2014 however, if material accounting impacts are expected, companies may need to consider disclosures as early as their 30 June 2014 financial report.
  • Once substantially enacted, deferred tax balances will need restating. This may be offset by the PPL if it is treated as an income tax under AASB 112 but this will not be known until the legislative form of the PPL is known.
  • The timing of income and expenses around 30 June 2015, managing tax funding/sharing and PAYG instalment impacts will all need to be considered.
  • It is uncertain whether the PPL will apply to certain companies that undertake collective investment, e.g. listed investment companies or life insurance companies (for policyholder taxable income). If the PPL were to apply to those companies, it would disadvantage them compared to investment trusts or superannuation funds in respect of the same economic activity.
 

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Federal Budget 2014

Federal Budget 2014
KPMG's review of the major implications arising from the 2014 Federal Budget.