Australia

Details

  • Service: Tax, Corporate Tax, Topics, Federal Budget
  • Type: Regulatory update
  • Date: 15/05/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Grant Wardell-Johnson

Grant Wardell-Johnson
Leader, Australian Tax Centre

+61 2 9335 7128

gwardelljohn@kpmg.com.au

Top 5 Budget measures for business 

by Grant Wardell-Johnson, Australian Tax Centre

The Federal Budget did not give rise to any significant surprises given the number of pre-Budget announcements and 'leaks' in the last month or so. That said, there are a number of measures which will give rise to significant consultation in the next year or so. I have extracted the top five measures impacting business from our recent Federal Budget brief.

Thin capitalisation
A number of changes to thin capitalisation have been announced, including the safe harbour gearing ratio for general non-bank entities will be changed from 3:1 to 1.5:1 and from 20:1 to 15:1 for certain financial entities. Most companies have 13 months to transition as the proposed commencement is on or after 1 July 2014. The safe harbour minimum equity requirement for banks has also been lifted from 4 percent to 6 percent.

 

Removal of deduction for interest on borrowings to fund foreign investments
From 1 July 2014 interest on borrowings used to purchase non-portfolio share investments in overseas subsidiaries will not be deductible. The government considers that the compliance benefits of allowing these deductions is outweighed by risks to the integrity of the corporate tax base.

 

Changes to spread deduction for rights and information first used for exploration
Deductions for the purchase of mining exploration licences and information first used for exploration will no longer be available in the year of purchase but instead will be spread over the shorter of 15 years or the anticipated life of the mine.

 

Monthly PAYG instalments – Extension to all large taxpayers
The previously announced change to move large corporate tax entities to monthly PAYG instalments has been extended to all large taxpayers (including trusts and superannuation funds).

 

Self-education expenses and FBT
Deductions for work-related self-education expenses will be capped at $2,000 annually from 1 July 2014. Employer provided education and training will continue to be exempt from FBT unless acquired by employee salary sacrifice. The FBT rate will increase by 0.5 percent (to 47 percent) when the government increases the Medicare Levy from 1 July 2014.

 

For additional measures see KPMG's 2013 Federal Budget Brief.

2013 Federal Budget Brief

Federal Budget Brief 2013
KPMG's key insights and analysis on the 2013 Federal Budget major implications for Australian business.
 

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