The OHL Wire ISSUE 10: The Federal Budget 2015-2016, how will it affect you

May 2015

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THE FEDERAL BUDGET 2015-2016: HOW WILL IT AFFECT YOU?

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WHAT QUESTIONS SMALL BUSINESSES SHOULD ASK FOLLOWING THE BUDGET

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15 YEARS ON: ARE RETIREMENT VILLAGES A WISE CHOICE?

LEGAL - WEALTH PROTECTION - INVESTMENT - BUSINESS - LIFESTYLE - SYDNEY

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5 TOP LEGAL TIPS FOR GETTING READY FOR TAX TIME

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WHAT’S ON IN SYDNEY

The Federal Budget

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How Will It Affect You? On 12 May 2015, Treasurer Joe Hockey delivered his 2015 budget speech. The budget relies on rosy growth forecasts that predict a return to a budget surplus during the next four years. This prediction has led many commentators to note there does not seem to be a strategy for returning to a surplus if the predicted growth does not materialise. In fact, many commentators state that, given the reliance on such an optimistic growth forecast, it is unlikely the budget will return to surplus in the next four years. A $7 billion deficit for 2018-2019 has been predicted.

There is reason to be cautious. Falling iron ore prices and slowing wage increases have led to less than expected tax receipts. Consequently, the Treasurer has stated the budget aims at transitioning from reliance on mining investment to more general growth across the board. The main winners in the budget are small businesses, defence and national security. It remains to be seen whether stimulus in those areas will be enough to achieve the predicted levels of growth across the board to bring the budget into surplus.

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OWEN HODGE LAWYERS

Employees As an employee, unless you fall into one of the specific categories of people who received funding changes, the budget will not substantially change your current circumstances. This is because there are no significant changes in the personal income tax rates across the population. Personal income tax rates may change due to the launch of the tax discussion paper in March, but the Government has said this is outside the budget announcement.

One area that does affect employees is the expansion of tax concession for employee share schemes, which will come into effect on 1 July. This expansion means that from 1 July, employees who are issued shares or options generally will not be liable to pay tax on their shares until they actually receive a financial benefit from those shares.

While cuts to the public service are smaller than last year's budget, more Federal Government employees will lose their jobs. Specifically, cuts will be made in the departments of health, education and immigration and border protection.

Although not solely relevant to employees, it is worth mentioning the so-called “Netflix tax”. The budget provides that digital products, such as streamed content and e-books, now will be subject to GST. Justifying the tax, the Treasurer said, "It is plainly unfair that a supplier of digital products into Australia is not charging the GST whilst someone locally has to charge the GST."

Small Business Owners Australia has at least two million small businesses, that generate less than $2 million per year. The budget contains good news for small business owners in the form of a large spend designed to encourage small business owners to invest in their businesses.

In his budget speech, the Treasurer said Australia's growth will come from growing small businesses into big businesses.

Small business owners who earn up to $2 million immediately will be able to claim a tax deduction of up to $20,000 on as many items as they purchase and receive a deduction on each one.

The budget also wipes out the fringe benefit tax on any electronic devices, which will benefit not only small business owners but all device owners. Other benefits to stimulate confidence include: • a 1.5% tax cut for small businesses earning up to $2 million; and • a tax discount of 5% for small unincorporated businesses including sole traders, partnerships and trusts.

For new businesses, the business registration process under the new budget will be streamlined through one website. New businesses also will be able to immediately deduct expenses that they incur setting up their company.

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Families with young children Families with young children have been well provided for in this budget. It includes a $38 billion package for families, with $7 billion ear marked for child care initiatives, though some of these only will come into effect in 2017. Another note of caution is these child care initiatives only will be funded if last year's proposed cuts to welfare are passed.

Child care subsidy From 1 July 2017, a new child care subsidy will be implemented.

It will be means-tested and based on the actual child care fees paid by parents.

Nannies Trial The Government has set aside approximately $250 million on the Interim Home Based Carer Pilot Programme, otherwise known as the Nannies Trial. The Nannies Trial will provide nanny subsidies for around 4,000 nannies caring for approximately 10,000 children. Eligible families are those who are unable to access Government-supported child care because of the unpredictable nature and hours of their work, such as shift workers. Families with incomes of more than $250,000 will not be eligible.

The Nannies Trial will start on 1 January 2016 and run until 31 December 2017.

Federal Parental Leave Scheme Previously, parents were able to access 18 weeks of leave at minimum wage in addition to any private leave they had. The budget abolishes this.

People with parental leave that is more generous than the federal scheme will not be eligible for any payment. Those people with access to schemes less generous than the federal one only will be eligible for a gap payment to make up for the difference between the two schemes.

The Government says this cut will save nearly $1 billion. Some commentators have suggested employers will restructure their parental leave schemes so their employees can take advantage of the Government scheme. Consequently, the projected savings may not materialise, compromising the funding of other initiatives.

Stay at home parents Under the budget, stay at home parents whose income is more than $65,000 per year, will lose access to child care rebates.

Immunisation The Government has set out its “no jab, no pay� policy, which will stop families of unvaccinated children from accessing family and child care benefits. The Government forecasts this will save up to $508 million during the next four years. Exemptions now will apply only for medical reasons.

A number of commentators have stated the number of people who do not have their children vaccinated as conscientious objectors is around two percent of all those people who have not had their children vaccinated. The commentators have suggested this means that almost all people who previously did not vaccinate their children, now will have them vaccinated.

As a result, it is suggested less money will be saved than predicted by the Government.

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Pensioners/Retirees The budget will include some changes for retirees. Under it, the Government will adjust the threshold for assets tests on the pension. Previously, singles over the age of 65 with assets (excluding the family home) of less than $775,000 were able to claim the partial pension. Under the budget, the new threshold now will be $550,000. This means some people at the lower end of the pension bracket will be better off, while some wealthier pensioners will have to rely more on their own means.

Other points that may be relevant to pensioners include: • the Government will not proceed with indexing of pensions by consumer price index only.

Pensions will continue to increase twice yearly, with the higher of inflation or wages; • no new taxes on superannuation; • anybody who currently has a pensioner concession card will continue receiving a concession card that provides the same benefits, such as subsidised utilities and transport, bulk billing and a cheaper pharmaceutical benefits scheme for prescribed medicines; • $1.6 billion to list new drugs on the pharmaceutical benefits scheme; and • more consumer choice in aged care.

Farmers In his budget speech, the Treasurer called farmers the most “resilient of all Australians” and “our best environmentalists”.

Significant resources have been set aside in the budget to help farmers currently battling with drought and to help plan for future drought conditions.

To that end, the budget provides $250 million to continue the drought loan schemes for another year.

In addition the budget provides: • funds to reduce the impact of pest animals in drought affected areas; • a deduction for new investment in water facilities, in effect from 1 July 2016; • a 3 year depreciation allowance for all capital expenditure on fodder storage assets; and • a deduction of the cost of new fencing from the tax bill from 1 July 2016.

Money also has been set aside to help rebuild drought affected communities with civil and civic infrastructure projects, including $1.8 million to fund 10 new counsellors as part of the Rural Financial Counselling Service.

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People with Disabilities The budget provides significant funds toward helping school age children with additional needs and/or disabilities. Specifically, the Government has committed $409 million to the new Inclusion Support Programme, which will commence on 1 July 2016.

The new Inclusion Support Programme will help parents who have children with additional needs to access child care by providing more funding to services for skilled staff and equipment.

The budget sets aside $1.3 billion to help students with disabilities get the help they need in classrooms.

Tertiary Students The budget has a number of changes affecting tertiary students and universities. The budget paper assumes the Government's reforms, including full fee deregulation, will proceed. The National Collaborative Research Infrastructure Strategy will continue to be funded for two more years. Funds also have been set aside to establish the controversial Bjorn Lomborg Consensus Centre, which will carry out cost-benefit analyses on climate change research. Funding for the centre remains in place even though the University of Western Australia, the centre’s planned host, has pulled out.

In a blow for young researchers, the Future Fellowships programme, which gives four years of funding to researchers, has been cut from 200 places two years ago, to 50 this year.

The budget also requires university graduates living overseas to start paying back their student loans if they earn more than $53,000 per year. The amount is calculated from all sources of income, both within and outside of Australia. If you fall into this category, you will need to register your details with the Australian Tax Office by 1 July 2017.

Next Steps Government revenue is below expectations from forecasts in last year's budget. Tax receipts have been lower than expected due to slowing wage increases, falling iron ore prices, increasing unemployment, the mining bust and continuing economic uncertainty in Europe and China, among other things.

Against this background, the budget predicts this year’s changes will be enough to create an overall economic improvement such that the budget will return to surplus in the next four years. The budget contains some clear stimulus packages, which suggest the Government believes the economy does indeed require stimulus. Questions have been asked as to whether it is possible for an economy that requires major stimulus in certain areas to strengthen across the board as forecasted.

If you would like specific advice on how the budget affects you, please call us.

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What questions small businesses should

ask following the budget?

During Australia’s budget night speech, Treasurer Joe Hockey focused a good portion of his talk on urging Australian’s entrepreneurs to take advantage of the opportunities available as part of the small business and jobs package in the 2015-2016 budget. The business-friendly budget positions are part of an effort to improve economic growth and revive investments. The treasurer and Prime Minister also hope this year’s budget will be more popular than last year’s.

Let’s find out.

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OWEN HODGE LAWYERS

With so many efforts being made to encourage entrepreneurs and growth, it is important for your organization to take advantage of new opportunities and incentives. A business lawyer at Owen Hodge Lawyers can advise you on your options for taking advantage of the 2015-2016 budget’s new business-friendly provisions. You should speak with an attorney about what the tax credits and other financial incentives mean for your organization.

To help you get started in taking advantage of budget benefits for businesses, here are five things to consider following the new budget announcement.

Do you have any purchases your business needs to make?

Currently, you can take an immediate tax deduction for company purchases up to $1,000. If you spend more than that on company equipment, you must take deductions for depreciation spread over several years. However, the new budget makes it possible for you to claim an immediate tax deduction for as many purchases below $20,000 as you want. The only catches are: your business must have an annual turnover of less than $2 million and the purchase must be made between 7:30 p.m. on budget night and 30 June, 2017. You have a limited amount of time to make these purchases and benefit from the immediate deduction, so don’t wait too much longer to act.

Are your corporate tax rates going to be impacted?

The new budget will result in a 1.5 percent tax cut for small businesses throughout Australia. Although the 2014-2015 budget included a 1.5 percent tax cut for all businesses, the new budget reduces the rates only for companies with an annual turnover of less than $2 million.

Companies that fit within this range will see their taxes decline 1.5 percent to 28.5 percent. The new rate kicks in on 1 July, 2015 and an estimated 780,000 organizations throughout Australia are expected to benefit from the tax break.

Can your organization benefit from an immediate deduction for accountant costs and legal fees?

Starting in July of 2016, startup organizations can immediately deduct professional costs associated with beginning operations. Traditionally, new businesses were required to write off these costs over a five year period. The ability to take an immediate tax deduction means it will be financially possible for many more new companies to get the legal advice they need to choose the right business structure and plan for a bright company future.

Will the budget actually achieve any economic growth?

Obviously, your immediate concern when it comes to the budget is the impact on your organization’s finances. However, your business is affected by the Australian economy as a whole.

The budget’s goal is trying to spur growth, but is it likely to be successful? The Reserve Bank of Australia says the economy currently is growing at an annual rate of two percent. This is just two-thirds of the growth rate necessary to stop the continuing rise in unemployment.

The public sector is not making a net contribution to growth with this budget, so the RBA says Australia is dependent upon rising house prices to prompt consumer spending—- which may not happen. The budget does not address some of the major issues that could impact growth, such as infrastructure or changes to superannuation. So it remains to be seen whether it will have the desired impact of improving the economy and making more consumers ready to spend.

These are just a few of the key considerations to think about as your company adjusts to the new budget. To make sure you are taking advantage of the benefits provided to businesses, be sure to talk to Owen Hodge Lawyers about how changes to the laws affect you.

Unincorporated businesses with incomes less than the $2 million threshold also will benefit from a five percent discount on the income taxes assessed on business income. This discount is capped at $1,000 each year and will come in the form of a tax credit.

Will you need to change your fringe benefit deductions?

The budget aims to reduce red tape within the tax system applicable to fringe benefits. FBT exemptions for entertainment in the form of meals now will be capped at $5,000 for companies in the public health and nonprofit sectors.

However, the good news FBT exemptions are being expanded for portable electronic devices used for work.

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15 Years On: Are Retirement Villages a Wise Choice?

Since passage of the Retirement Villages Act (the Act) in 1999 and relevant regulations, several just how have retirement villages faired since the introduction of key legislation and what are the key changes you ought to know about?

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OWEN HODGE LAWYERS

According to figures published by NSW Fair Trading, NSW has approximately 595 retirement villages, accommodating more than 36,000 residents. Retirement villages are defined to mean complexes containing residential premises that are, or are intended to be, predominantly or exclusively occupied by retired persons who have entered into village contracts with the complex’s operator. When introduced, the legislation’s primary objective was ensuring the protection of the rights of retired persons within these premises.

A key ingredient in the recognition of retirement villages is the requirement to have a contract with the complex’s operator.

Not all complexes are included and certain premises, such as nursing homes, caravan parks and manufactured home estates, specifically are excluded from the Act. The mere fact that a certain development only attracts those 55 and older or the fact that a complex markets itself as an ideal retirement location or village does not necessarily deem it a retirement village under the Act.

The standard contracts and disclosure requirements mean seniors no longer need to struggle to understand the complexity of their transactions and mistakenly sign up for things which they are unclear about.

NSW Fair Trading now has developed template contracts for the five most common village types. Operators may adapt the contract for their village with a logo and any additional terms, as long as they do not conflict with the requirements of the retirement village laws or any other laws. This certainly has helped introduce immense transparency in how the contract documentation should look.

What must be Disclosed?

The disclosure statement must contain certain prescribed information about the retirement village to give prospective residents a general understanding of the features and financial arrangements.

Contract as a Key Ingredient

Key information includes:

As mentioned, residents must enter into a contract with the complex’s operator either in respect to living in the complex and/or receiving certain services offered by the operator.

• details of the fees and charges that will be payable by the resident depending on whether the resident is purchasing or leasing the premises • information on the sharing of legal costs for the preparation of the contract • information on the services and facilities available in the village, including information on how the village will be managed • information on the settling in period • information on the repairs and maintenance of “items of capital” • information on the funds available to a resident/resident’s estate when the resident leaves the village and the period by which these funds will be returned • information on the mechanism for the resolution of disputes

A resident may be asked to sign different types of contracts before moving in to a retirement village. The most common are loan and licence agreements, leases and services and facilities agreements. A resident also might be able to buy into the complex and become an owner of a unit within the village.

Unknown to many, irrespective of the type of contract, the law protects residents and prospective residents by providing for a 7-day cooling-off period served by a written notice on the contract’s other party. By serving such notice, the contract effectively will be rescinded.

Welcomed Changes In 2013, NSW’s Retirement Villages Amendment (Standard Contract) Regulation, modified the Retirement Villages Regulation 2009 to include three compulsory documents: • Standard retirement village contract • General inquiry document that an operator must provide within 14 days after becoming aware that a person is a prospective resident, or acting on behalf of a prospective resident • Disclosure statement that an operator must provide to a prospective resident, or person acting on behalf of a prospective resident, within 14 days after that person requests a copy or expresses an interest in particular premises in the village.

This replaced the previous prescribed form of disclosure statement, which was regarded as haphazard and confusing.

Through the 2013 changes, the government has made moving to retirement villages even easier by making the transaction more like buying and selling a home.

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Operators also are required to make available for inspection, or provide free of charge, other information about the village. This includes a village site plan, village rules, safety inspection reports, statements of proposed expenditure and audit accounts for the village.

Conclusion Depending on your own personal, financial and medical circumstances, retirement villages can seem the perfect solution for you as you age and a wise choice, if correctly understood.

Though there is greater consumer focus that acts in favour of the resident, it is important to remember retirement village contracts may vary significantly from village to village. Prospective residents are encouraged to obtain legal advice first before signing or entering into any arrangement with an operator. Moreover, different legal structures and contractual arrangements also may attract the application of other legislation, such as strata title, community title, companies and securities, manufactured home or tenancy legislation.

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5 top legal tips for

GETTING READY FOR TAX TIME

The tax year is coming to an end, which means your organization needs to be geared up and ready to go for tax season. Complying with all tax obligations can be complicated and the penalties for making a mistake can cost your business.

Talking to an experienced business tax lawyer is always your best bet, but there are also some simple things your company can do to make this tax season a smooth one: 1. Get the paperwork in order: Tax time means having stacks of paperwork at-the-ready to determine what your company made, what it spent, and what it owes.

Ideally, you have an effective system in place to ensure your profits and losses are tracked and ex-penses are tallied.

However, even companies with the best accounting systems, may have paperwork that falls through the cracks. You need to ensure you have assembled ledgers, profit and loss statements, expense reports, and all the other documents you need to get your year-end taxes complete. You also should keep every document from the Australian Taxation Office in one place.

2. Go back over your receipts and financial agreements for big ticket buys.

While you may not review every expense over the course of the year, you should look back at your big ticket items. List the equipment your organization has bought during the year and compile the receipts for major expenditures.

The purchase of capital equipment may entitle you to a de-duction for depreciation while other documented expenses should be tax-deductible. Be sure to have finance agreements available as well so you can calculate any deductible inter-est paid.

3. Reconcile your accounts.

Bank accounts, credit accounts, loans, debt accounts - it may seem like a big hassle but all of these different accounts and financial facilities need to be reconciled and balanced. This will help ensure you can catch errors or discrepancies early before you give your accountant incorrect info or submit inaccurate tax forms.

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4. Review your employee records.

Employers provide payslips with the PAYG withheld amount for each pay period and report PAYG withholding quarterly, monthly, or at specific payment cir-cles depending upon the amount being withheld. Even with these ongoing obligations, there still is more to do when tax time arrives.

Be sure you are ready with your annual payment summary and annual PAYG withholding reports. It is also a good time to review the withholding, superannuation payments, and tax forms related to employees when you reconcile the rest of your year-end accounts.

5. Make an appointment with your accountant and your lawyer.

Some companies have in-house accounting staff that handles all their tax needs while others outsource their ac-counting functions. Whether your accountant works directly for your organization or you see an outside accountant, you should schedule a meeting to go over everything.

Ultimately, you are the one who is going to be accountable for paying for problems on tax forms. So it is up to you to ensure everything is done right. A tax attorney also can help you with advanced tax planning, legal compliance, and providing tax advice to help your business save over during the upcoming year.

By following these five simple tips, you can ensure your forms are submitted on time, they are correct, and you’ve fulfilled your company’s obligations to the Australian Taxation Office. Of course, it is always a good idea to get legal advice and ensure you have complied - OHL Lawyers are here and ready to help. So give us a call today!

OWEN HODGE LAWYERS

What’s On in Sydney Vivid Sydney 2015

Sydney Film Festival

Transport Heritage Expo

25th May till 11th June The Rocks , cnr George & Argyle Streets (02) 8114 2400

3rd June till 14 June 1300 733 733 http://sff.org.au

6th June till 8th June http://www.transportheritagensw.com.au/

Vivid Sydney is an 18 day festival of light, music and ideas - the largest of its kind in Australia and in the Southern Hemisphere.

Come along and check out some amazing installations and projections transform Sydney’s architecture and open spaces.

The 62nd Sydney Film Festival offers Sydneysiders another exciting season of cinema amidst a whirlwind of premieres, red-carpet openings, panel discussions, international guests and more.

The Transport Heritage Expo brings Sydney's transport history to life, with the excitement of steam train rides through the suburbs and return of vintage double decker buses to the streets of the Sydney central business district.

Australian Burlesque Festival

Parramatta District Historical

Hawkesbury Art Fair

11th June till 4th July 105 Victoria Road, Marrickville NSW www.australianburlesquefest.com/

6th June till 4 July Gregory Place, Parramatta NSW 2150 www.parramattahistorical.org.au

29th May till 14 June Deerubbin Centre (First Floor), Windsor NSW www.hawkesbury.nsw.gov.au/gallery

The Australian Burlesque Festival is the biggest celebration of tease in the Southern Hemisphere and brings together the best of national and emerging performers along with renowned international icons never before seen on Australian stages.

Come along to hear guest speakers give illustrated talks on Family History subjects. The exploration of your family history through internet, journals and reference folios are available at the Society headquarters.

The Australian Ballet’s The Dream is one of the greatest spectacles of dance you’ll see all year. Experience the physicality and musicality of ballet in three works by the great 20th century English choreographer Frederick Ashton.

Queen’s Birthday: Another Long Weekend In Sydney

Since 1788, Australians have celebrated the birthday of the Monarch of the Realms. Because Australia is a member of the Commonwealth of Nations, the Monarch remains the official head of state, even if the role of the King or Queen is mostly ceremonial today. Australia joins UK, Canada, and New Zealand in celebration of the Queen, but different countries have chosen a different day to mark the Monarch’s birth.

Throughout Australia (except in Queensland and Western Australia), the Queen’s Birthday is celebrated on the second Monday in June. The holiday always is observed on this date, although the current Monarch, Queen Elizabeth II, was actually born in April 21, 1926. Australia has chosen the second Monday in June because everyone loves three day weekends!

This upcoming Queen’s Birthday should provide plenty of opportunities for fun on your extra day off, but how can you make the most of the celebration? Here are a few ideas: • Attend a sporting event. Many events are held on the Queen’s Birthday because so many businesses are closed and people have the day off. The Australian Football League Game at the Melbourne Cricket Club traditionally is held on this day, with the Melbourne Demons and the Collingwood Magpies

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going head-to-head. Although you can’t actually hit the slopes yet, the Queen’s Birthday also typically is seen as the opening weekend of snow season. So check out the slopes, or check out local team schedules around Sydney to see what sporting events and games you can attend.

• Relax at the beach. Sydney’s beaches always are crowded on the Queen’s Birthday. So stop by Coogee Beach, Bondi Beach, Shelly Beach or your own local favorite to find plenty of fun in the sun. If you want a little fun with water but aren’t interested in the beach, you also can stop by the Manly Sea Life Sanctuary for a stunning and educational aquatic experience.

• Enjoy wine country. A short trip out of Sydney to The Hunter Valley is a great way to spend your three-day weekend, touring local vineyards and sampling some of Australia’s finest wines.

There are more than 150 different wineries, vineyards and cellar doors you can visit on the Queen’s Birthday.

• Spend the day outdoors. Whether you prefer communing with nature at Taronga Zoo or would rather your day be spent in Blue Mountains National Park, there is nothing better on the Queen’s Birthday than spending the day outside instead of in your office.

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