Deficit do ldru sforeedge.com.au/.../EY-federal-budget-brief-2016.pdf · EY Federal Budget Brief 2016 2 An investment in smaller businesses, funded mostly by larger businesses, is

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2EY Federal Budget Brief 2016

An investment in smaller businesses, funded mostly by larger businesses, is the centrepiece of the Government’s attempt to stimulate an economy on the brink of deflation — without an increase in spending.

A modest package focused around defence and related industries comprises the budget night innovation announcements.

At the same time, structural tax reform has been put on the back burner until after the election.

Instead, a package of tax concessions for small and medium enterprises funded by tougher tax measures for multinationals will drive the core of the stimulus effort. The Government will encourage growth in small businesses by lowering the corporate tax rate immediately and extending other concessions, such as the immediate deductibility of certain expenditure.

Although large businesses have the promise of a future 25% corporate tax rate in the 2026-27 year, they will face significantly greater penalties and tighter anti-avoidance rules before they get there.

In addition, higher-earning taxpayers will be called upon to fund the reducing deficit through changes to superannuation tax concessions. Smokers will also play their part.

Overall, this budget seeks to navigate the difficult task of stimulating an economy in transition by implementing spending restraint and starting a Ten Year Enterprise Tax Plan, with a nod to innovation.

However, it is not clear whether the announced stimulus measures will be enough to transition Australia to the “stronger, more diversified, new economy” the Treasurer envisages.

Business will also have to wait until after a double dissolution election to see how much of this is realised.

Ex ec utiv e S um m ary

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A responsible election budgetAs the external economic environment remains docile, the 2016-17 budget reflects the bare cupboard to which the government can turn to stimulate moderate growth. It manages to uphold its commitment to rein in the fiscal deficit by avoiding the fiscal spending sweeteners that are often seen in an election year.

Instead, it relies on the propensity of small and medium enterprise (SME) spending to provide the necessary economic growth. Economic stimulus has been targeted at the SME sector through a range of initiatives aimed at increasing smart investment and productivity through a package of tax cuts — effective from 1 July 2016.

These initiatives are economically sound, being based on SMEs having a higher propensity to spend these savings. At the same time, they expand the base of SMEs to include the more technologically innovative organisations with higher turnovers.

Fiscal restraintThis is a budget that builds on the initiatives already announced, maintaining the themes of innovation and a transitioning economy.

It controls the underlying cash deficit by restraining growth in spending in conjunction with sustainable revenue policies. As a result, the deficit is forecast to decline over the forward estimates, with growth in government debt being correspondingly restrained.

Demonstrating a desire to get its own house in order, the Government continues to seek increased value for its dollar through Functional and Efficiency Reviews. Over the past 18 months, the Government has achieved savings in excess of $2.7b through 12 reviews, and is continuing this focus, with a further eight reviews announced in this Budget.

Innovation Building on its investment in the National Innovation and Science agenda, this Budget has announced plans to capture and promote innovative thinking throughout the economy. The revised tax arrangements for SMEs will encourage growth and investment in this segment of the economy, fuelling growth in areas of technology and innovation.

The Government has also recognised changes that disrupt existing investment models, with reference to crowd funding initiatives. Such initiatives recognise that capital raising is now moving away from the existing model of borrow and repay, effectively offering a reduction in the cost faced by entrepreneurs to grow and develop both new markets and products.

Stimulus fundingIn a prudent approach, these initiatives and tax cuts will be funded through:

• New measures on multinational tax avoidance

• Changes to superannuation contributions concessions for the wealthy

• Increases in tobacco excise

This avoids the difficulties of tax reforms in an election year, while at the same time addressing some of the inequities in the current tax system.

Defence the big winnerAlthough the Budget picks no industry favourites, its innovation and industry policy strategy is pinned heavily to the defence industry. With no new major infrastructure expenditure, defence is the main beneficiary from the budget, albeit primarily reaffirming previous announcements in upgrading the Royal Australian Navy through the continuous shipbuilding program.

The Navy upgrade is anticipated to create 3,600 direct jobs as well as acting as a catalyst for further jobs throughout the supply chain. This will support the Government’s innovation agenda as well as developing a highly skilled and technically capable workforce. The Treasurer hopes that this will contribute to the economy transitioning towards advanced services and innovative manufacturing to provide real productivity growth.

Economy




The Budget’s tax measures reflect Australia’s need to transition its economy with reduced tax revenues. They focus on reducing superannuation tax benefits for higher income taxpayers and increasing taxes paid by multinationals and large businesses. The Government intends to assist growth by applying these funds to those more likely to spend and invest, namely:

• Small to medium businesses with incomes less than $10m

• Middle-income taxpayers with incomes in the $80,000+ plus range

• Lower-income taxpayers, who are being encouraged to increase their superannuation contributions

SuperannuationThe Budget also includes tax approaches to establish a more sustainable superannuation system by:

• Targeting unsustainable and generous concessions in the superannuation system

• Enhancing the position of lower-income superannuation contributors

• Allowing contributions to continue for Australians past 65 up to 75 years old

Tax avoidance measuresIn addition, strong tax avoidance measures, especially targeting multinational businesses, involve:

• Substantial funding and reorganisation of the Australian Taxation Office (ATO) with a new Tax Avoidance Taskforce headed up by the Commissioner himself, targeting avoidance by multinationals and higher wealth individuals, to raise $3.7b over four years

• A program to strengthen tax rules covering multinational businesses including (starting from 2016) expanded Transfer Pricing rules, (from 2017) an innovative Australian Diverted Profits Tax and (from 2018) adoption of the OECD Anti-Hybrids recommendations under the international BEPS program

• A tax transparency code for businesses with turnover of more than $100m p.a.

• Whistleblower protections and a plan to develop enhanced disclosure to the ATO of potential tax avoidance

• Increased penalties for non-payment of tax and non-disclosure of tax data

Tax benefitsThe taxes raised from these measures will be targeted to relieve the tax burden of working Australians and small to middle market businesses, with:

• A 27.5% tax rate for middle market companies with turnovers of less than $10m p.a. and greater discounts for unincorporated small businesses. This increase in the turnover limit from $2m p.a. will affect more than 500,000 businesses in the middle market, not only ‘tradies’ but service businesses, IT businesses and traders around Australia, which will also benefit from other simplified small business tax rules

• An extension of the middle market personal 32.5% tax rate beyond an upper income limit of $80,000 to $87,000 p.a.

Tax




Corporate taxAs the Treasurer acknowledged, Australia’s 30% corporate tax rate is internationally uncompetitive, but Australia is not in a position to undertake major immediate reforms. Instead, the Budget lays out a long term strategy to bring the corporate tax rate to 25% by 2026-27. Despite the lengthy timeframe, this is a welcome first step to matching international corporate tax trends.

The Tax Appendix discusses these and other welcome and important measures, which do not amount to ‘big bang’ tax expenditures or reforms. They include consolidation changes, simplifying various tax rules and improving the mechanisms for foreign investors to invest in Australia. They also include measures to improve the governance of Australia’s tax system. Readers of the Budget tax measures might wonder: “Is that all there is to tax reform?” However, we think this is a realistic delivery of reforms in light of Australia’s challenging budgetary position.


Super system overhaulNow that the Government has announced the ‘objective’ of the superannuation system, the Budget includes changes to tax concessions designed to support this. In particular, the changes will accommodate for new deferred annuity products and will reposition a number of foundational elements to strengthen the system for the future.

They include a raft of measures commencing on 1 July 2017, including:

• Lowering the annual cap on concessional contributions to $25,000

• Allowing individuals to make additional concessional contributions where they have not reached their cap in the previous five years (since 1 July 2017). Access to these unused caps will be limited to those with a balance of less than $500,000

• Removing the current work-test contribution restrictions on people aged 65 to 74. Individuals up to age 75 will also be able to claim an income tax deduction for personal contributions, regardless of their employment circumstances

• Raising the income threshold for the low income spouse contribution offset of up to $540 p.a. to $37,000 from $10,800

• Introducing a $1.6m cap on the total an individual can transfer into a pension. A tax on amounts transferred in excess of the cap (including earnings on excess transferred amounts) will be applied, similar to the current treatment of non-concessional contributions (NCCs). Members already with

pensions with total balances above $1.6m will be required to reduce their balance to the cap by 1 July 2017

• Introducing an indexed $500,000 lifetime NCC cap. This will take into account all NCCs made on or after 1 July 2007, and will commence from budget night. Contributions made before commencement cannot result in an excess. However, subsequent excess contributions will need to be removed or subject to penalty tax

• Introducing an offset to superannuation funds, on behalf of low income earners, up to a cap of $500 p.a.

• Lowering the point at which high income earners pay additional contributions tax from an annual adjusted taxable income of $300,000 to $250,000

• Removing the anti-detriment provisions

• Removing the tax exemption on earnings of assets supporting Transition to Retirement Income Streams. A rule that allows individuals to treat certain superannuation income stream payments as lump sums for tax purposes will also be removed

• Making earnings on deferred lifetime annuities tax free

• Introducing a range of changes with similar application to defined benefit schemes

Despite being aligned to the defined superannuation system purpose, these changes will be a further administrative burden that may challenge short-term efficiency objectives of the system, funds and service providers and associated government agencies.

Superannuation




Further revenue reductions for aged care providersThe scoring matrix of the Aged Care Funding Instrument (ACFI) will be amended to achieve efficiencies of $1.2b over four years. The Complex Health Care component of ACFI indexation rate will be reduced by 50% in response to it growing at 2.5 times faster than the other funding components.

To assist aged care providers deal with the reduction in funding, the Government will establish a $53.3m transitional assistance fund. Rural and regional providers will receive a boost of $102.3m over four years by applying the Modified Monash Model to the Aged Care Viability Supplement. The ‘My Aged Care’ contact centre will also receive funding of $136.6m to assist in providing additional information on aged care.

Other





Appendix Federal Budget Tax




Corporate tax rate reduction — towards 25% in 2026-2027Staggered reduction in the corporate tax rate over a 10-year periodA corporate tax rate reduction will start in 2016-17 and culminate in a 25% rate for all taxpayers by 2026-27. This will be achieved by progressively increasing a qualifying turnover threshold from <$10million in 2016-17 to <$1billion in 2022-23 for a 27.5% rate and then reducing the rate by up to 1% annually for all taxpayers until 25% is reached.

Australian subsidiaries of large corporate groups should be aware that, to access reduced rates in the initial years, they may need to aggregate the turnover of all global associated entities to determine whether they satisfy the turnover threshold.

Company income tax rate table — 2016-17 income year and following:

Income Year

Turnover Threshold (in $) is less than

Company Tax Rate (%)

2015/16 2m 28.5^

2016/17 10m 27.5*

2017/18 25m 27.5

2018/19 50m 27.5

2019/20 100m 27.5

2020/21 250m 27.5

2021/22 500m 27.5

2022/23 1bn 27.5

2023/24 All companies 27.5



2026/27 All companies 25.0^ The company tax rate for certain small business entities 28.5%

* Company tax rate for small business entities reduced to 27.5% (announced in 2016-17 Federal Budget)

Source: Budget Paper 2016-17 No.2

Greater transparency of tax issues to the public and the ATOVoluntary Tax Transparency CodeTo be adopted from financial year 2016 as proposed by the Board of Taxation (the Board).

For businesses with a turnover of greater than $100m, who operate through company structures or are treated as companies for Australian tax purposes, the disclosure should include:

• A reconciliation of accounting profit to income tax paid or income tax payable

• Effective tax rates (ETR) for Australian and global operations

The Board proposes that the Australian Accounting Standards Board should develop guidance material to provide a common definition of ETR for reporting purposes. Businesses are also encouraged to adopt commonly accepted methodologies for ETR calculations prior to that guidance being made available.

In addition, the Board recommends that businesses with a turnover of more than $500m also disclose:

• Information on tax policy, tax strategy and governance

• Total tax contribution

• International related party dealings

Under the Voluntary Tax Transparency Code (Code), disclosure may be by way of inclusion in Australian general purpose financial accounts, a tax report prepared for another purpose (for example, an Extractive Industries Transparency Initiative report), or a document prepared for the purpose of the Code. Critically, the document must be publicly accessible via the business’ website. Where the information is included in general purpose financial accounts, it is expected to be subject to the normal audit processes for financial statements. However, the Board does not recommend that the information be made ‘mandatorily’ subject to audit. There is no detail as to how businesses will be encouraged to adopt the Code.

Tax Analysis



Protection for whistleblowersNew arrangements for tax avoidance whistleblowersThe Government will introduce new arrangements to protect whistleblowers who disclose information to the ATO on tax avoidance behaviour and other tax issues on or after 1 July 2018. Whistleblowers will have their identity kept confidential and will be protected from victimisation and civil and criminal action.

Taxpayers need to take measures now to make sure that disgruntled people do not use these measures to leverage better outcomes for themselves. A prudent measure might be to include in a company’s code a mechanism for people concerned about the tax affairs of the company to elevate the issue for consideration within the company.

New tax planning disclosure requirementsTax and financial advisers to report aggressive tax planning schemesThere is to be consultation on a new regime that will require tax and financial advisors to report potentially aggressive tax planning schemes.

Tax system governanceNew measures to enhance governanceThe tax reform discussion paper of 2014 recognised Australia’s tax system complexity and lack of structured maintenance. The Budget has some measures to enhance tax system governance, including:

• A commitment to regular Regulatory Reform Bills to update and improve our tax laws

• The Board’s online Sounding Board to enhance feedback on reforms

• Involving tax experts in developing better tax policy and law design

• Reducing lengthy provisions in tax law, supporting ATO release of public guidelines on the new tax laws as they are being drafted, so as to clarify the scope of tax laws

Although not comprehensive, these are a welcome first instalment. We believe Australia needs a more structured system with a Tax Reform Commission and hope that this will be addressed in years to come.

Diverted Profits TaxAdditional anti-avoidance measure for multinationalsA new Diverted Profits Tax (DPT) to apply effective from 1 July 2017 will build on changes to the tough multinational anti-avoidance rules introduced last December and closely leverage further aspects of the UK’s DPT regime.

Specifically, Australian tax will be levied on the profits of certain foreign entities within large corporate groups that:

• Have emanated from or are connected with payments and transactions involving a related party in Australia

• Are subject to an overall level of tax in the foreign jurisdiction that does not exceed 80% of the tax that would otherwise be paid on those profits if derived in Australia

• Have ‘insufficient economic substance’, based on the ATO’s assessment of whether it is reasonable to conclude from available information that the relevant transaction was designed to secure the tax reduction

Where non-tax financial benefits exceed the quantum of any tax differential, the economic substance requirement is taken to be satisfied. However, the actual assessment and quantification of non-tax financial benefits may not be easy to determine in all cases.

The range of transactions that can potentially fall within the ambit of the DPT is deliberately broad and may encompass arrangements that fully comply with Australia’s already robust and effective transfer pricing laws.

The applicable tax rate on diverted profits is 40% with no offset being allowed for foreign tax levied on those same profits. As the rules apply from 1 July 2017 to arrangements put into place both before and after that date, affected entities will need to immediately assess whether any existing arrangements might fall within the ambit of this provision to avoid this punitive outcome.

The operation of the provision requires an assessment from the ATO.

Tax Analysis


Tax consolidation Changes to previously announced integrity measures Businesses should review impacts for previous and proposed M&A transactions for the following:

• Deductible liabilities will now be excluded from allocable cost amount (ACA) calculations. This should be a favourable modification to the previous proposal (deemed income amounts announced on 14 May 2013) and will now start from 1 July 2016.

• Deferred Tax Liabilities (DTL) treatment under ACA calculations will be modified by removing adjustments relating to DTLs, commencing after the date of law introduction (new measure).

• The previously announced securitised assets rules will be extended to non-financial institutions from 3 May 2016, with transitional rules for earlier arrangements.

The Budget was silent on the fate of other previously announced consolidation integrity rules, including churning rules for foreign owned group restructures and intra-group liabilities. Consolidated groups and MEC groups should urgently review positions for previous transactions within the scope of the previously proposed deductible liability rules. For future transactions, ensure that the new rules are factored into tax transaction structuring and due diligence processes.

MultinationalsATO TaskforceATO will receive $679m additional funding over four years to establish a taskforce to enhance and extend current compliance activities targeting large multinationals, private groups and high-wealth individuals to 30 June 2020. This taskforce is expected to raise $3.7b over the forward period.

Taxpayers will need to ensure they are adequately prepared for what will be a heighten level of well-resourced ATO scrutiny. Taxpayers should also be aware that the ATO will be testing the law through court cases where there is deliberate tax avoidance.

The Taskforce will be led by the Tax Commissioner and assisted by a panel of eminent former Judges. It will feature the collective efforts of more than 1,000 experts, including 390 new specialised officers. It will be supported by enhanced information sharing with ASIC to drive risk analysis and detection.

Transfer pricingThe Budget has brought forward the effective date for implementing the new guidance on the application of the arm’s length principle made in the 2015 OECD Report — Aligning Transfer Pricing Outcomes with Value Creation Action Items 8-10 to 1 July 2016.

Action items 8-10 mandate rules to prevent base erosion by providing guidance that expands the range of transfer pricing issues in connection with the following intragroup arrangements:

• Transfer of risks and associated profits to a group member solely because it has contractually assumed risk

• Transactions that would not, or would only very rarely, occur between third parties, including clarification when transactions can be re-characterised

• Advocating and providing guidance for the application of the comparable uncontrolled price method for pricing commodity transactions

• Ensuring that profits associated with the transfer and use of intangibles are appropriately allocated with value creation, including cost contribution arrangement

• Intragroup service arrangements involving common base eroding payments, such as management fees and head office expenses

These guidelines further empower the ATO to challenge profit shifting arrangements under the revised legislation. Taxpayers will need to ensure they are prepared for the ATO’s broader range of possible challenges to their transfer pricing arrangements. Acting ahead of key trading partners increases the risk of controversy and double taxation particularly given that these guidelines have not been fully developed (e.g. profit splits) nor considered on a holistic basis.

In this regard, it has always been intended that the changes made to the OECD guidelines should be applied holistically, considering the various aspects of transfer pricing in their totality and not in isolation. It has also been the stated objective that changes to the guidelines should be universally adopted.

Tax Analysis


Eliminating hybrid mismatch arrangements Australia will implement the OECD rules to eliminate hybrid mismatch arrangements from the later of 1 January 2018 or six months following the date of Royal Assent of the enabling legislation.

The timeline allows for the complexity of the law including interaction rules and means Australia will not be front running, which could have been adverse to Australia’s competitiveness in attracting capital and investment.

This announcement takes into account the recommendations by the Board, which will undertake further work on how best to implement these rules in relation to regulatory capital for financial institutions.

Increasing administrative penalties The Government will increase administrative penalties imposed on companies with global revenue of $1b or more who fail to adhere to tax disclosure obligations. This measure will apply from 1 July 2017.

Taxpayers contemplating not meeting their disclosure requirements by opting to pay a penalty need to rethink this strategy.

Penalties relating to the lodgement of tax documents to the ATO will be increased by a factor of 100. This will raise the maximum penalty from $4,500 to $450,000, which will help to ensure that multinational companies do not opt out of their reporting obligations.

Penalties relating to making statements to the ATO will be doubled, to increase the penalties imposed on multinational companies that are being reckless or careless in their tax affairs.

TOFA Reform of the Taxation of Financial Arrangements (TOFA) rules has been contemplated since TOFA’s introduction in 2010 as the rules are overly complicated and difficult to apply in practice. However, the amendments proposed in the Budget fall short of an overhaul of the rules and are targeted as follows:

• simplifying the accruals and realisation tax rules to reduce their application to arrangements and taxpayers

• introducing a new tax hedging regime

• simplifying the rules for foreign currency gains and losses

• strengthening the link between accounting and tax concepts in the TOFA rules

It is intended that the above changes will remove the majority of taxpayers (except financial institutions) from the TOFA rules and provide simpler and more certain rules. The changes will apply from income years commencing on or after 1 January 2018.

Asset backed financing Brought in line with other financing arrangementsAs part of the Government’s commitment to support and encourage large infrastructure projects, amendments will be introduced to ensure that the tax treatment of asset backed financing arrangements is the same as other financing arrangements based on interest bearing loans or investments. These measures will apply from 1 July 2018.

Tax Analysis


Small business measuresAccess to tax concessions The Budget announced that the small business (revenue) threshold will increase from $2m to $10m from 1 July 2016. As a result, such businesses will be able to access a number of tax concessions from 1 July 2016, including:

• The immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017 and then $1,000

• Some compliance-based simplified trading stock rules

• A simplified method of paying PAYG instalments calculated by the ATO

• The option to account for GST on a cash basis and pay GST instalments as calculated by the ATO

• Immediate deductibility for various start-up costs

• A 12-month prepayment rule

• Some FBT concessions from 1 April 2017

However, the current $2m threshold is retained for access to the CGT small business concessions.

Small business tax rate reductionAs part of adjustments to the company tax rates, the rate for small business entities that satisfy the new $10m threshold will reduce to 27.5% (from 28.5%) from the 2016-17 income year. The tax discount (or tax offset) for unincorporated small businesses will increase from 5% to 8% on 1 July 2016 and then increase over a 10-year period to 10% before reaching 16% in 2026-27. The threshold will increase to turnover of $5m. The maximum value of the discount per individual will remain at $1,000.

Other measuresTargeted amendments to improve the operation and administration of the private company Division 7A provisions, following the Board of Taxation’s 2015 report, will be effective from 1 July 2018.

Personal income tax changesThe Government announced that it will increase the 32.5% personal income tax threshold from $80,000 to $87,000 from 1 July 2016 (one day before the election) in an attempt to go some way to addressing tax bracket creep, accepting that it is a modest change given the current economic climate. The Medicare low-income thresholds are adjusted from the 2015-16 income year. For high income earners, the Treasurer indicated that the 2% Budget deficit levy (tax) on incomes over $180,000 would not be extended. It will end on 30 June 2017.

Personal tax rates and thresholds:

Taxable Income Tax Rate (2016 – 2017)

0 – $18,200 Nil

$18,201 – $37,000 19c for each $1 over $18,200

$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000

$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000

$180,001 and over $54,232 plus 47c* for each $1 over $180,000

*Rate inclusive of 2% temporary budget repair levy Rates do not include the Medicare Levy of 2%

Source: Budget Paper 2016-17 No.2

New Collective Investment VehiclesWe welcome the introduction of a new ‘look through’ corporate New Collective Investment Vehicles (CIV) from 1 July 2017 and limited partnership CIV from 1 July 2018. This initiative together with the Asian Region Funds Passport represent a significant step towards building Australia as an international funds management platform.

The new CIVs will be required to meet similar eligibility criteria to managed investment trusts (MITs). We hope that, consistent with the Board report and international funds, the look through status is not tainted by the CIV’s ability to control non-passive investments.

We also hope that the Attribution MIT regime will still be enacted, as it will take time for Australian investors to be familiar with the new CIVs.

Tax Analysis


Indirect tax Abolition of GST low-value threshold from 1 July 2017Non-resident merchants will have a GST liability for goods sold online.

The Government has re-stated its intention (previously announced in August 2015) to abolish the GST low-value threshold, principally applicable to goods purchased over the internet and imported by consumers. Non-resident businesses will be required to collect and remit the GST payable. The $1,000 threshold will be abolished with effect from 1 July 2017.

There is still no detail regarding the practical measures to enforce the compliance of non-resident businesses, or how customs clearance into Australia will be expedited for goods sold by non-residents who voluntarily register for and collect GST.

GST treatment of digital currenciesChanges flagged to enable Australian entrepreneurs to compete in FinTech Although not specifically referred to in the Budget, on the same day, the Treasurer released a discussion paper regarding the GST treatment of digital currencies (e.g. Bitcoin). This discussion paper flags potential changes to the GST law to enable Bitcoin to be treated in the same manner as conventional currencies. Change in this area is essential to enable Australian entrepreneurs to compete in the global FinTech market. Currently, digital currencies are subject to GST in Australia. In this area, Australia lags behind other VAT/GST regimes, which treat digital currencies the same as traditional currencies.

GST impact of increase in simplified taxation system thresholdMore taxpayers may elect to use simplified GST accounting methodsTaxpayers who fall under the enhanced small business tax threshold of $10m will also be able to take advantage of various GST administrative concessions from 1 July 2016. These include the ability to elect to account for GST on a cash basis or pay GST using the instalment method. A simpler BAS form will be trialled from 1 July 2016 for these taxpayers.

Wine producer rebate Reduced and tightenedThe annual Wine Equalisation Tax (WET) producer rebate cap of $500,000 per annum will be reduced to $350,000 from 1 July 2017 and further reduced to $290,000 from 1 July 2018.

Access to the rebate will also be tightened from 1 July 2019. Under new eligibility criteria, a wine producer must own a winery or have a long-term lease over a winery and sell packaged, branded wine domestically. These changes are intended to remove distortions in the wine industry, principally through removing artificial structures and multiple rebate claims. Further consultation will be undertaken to finalise details on these tightened criteria.

A new grant scheme worth $50m over the next four years will support Australian wine tourism and exports.

Excise refund scheme for distillersExtended to domestic spirit producers (including producers of non-traditional ciders) from 1 July 2017. The scheme currently provides eligible brewers with a refund of 60% of excise paid up to $30,000 per year.

Duty deferral for Trusted TradersFrom 2017-18, entities participating in the Australian Trusted Trader Programme will be able to defer import duty obligations. Accredited traders will have the opportunity to make duty payments on a monthly basis, rather than at the time goods are entered for home consumption, which is the current requirement.

Enhanced Project By-law SchemeClosed as of 3 May 2016The Enhanced Project By-law Scheme’s (EPBS) closure removes the incentive of import duty concessions offered to major projects in return for the implementation of Australian industry participation plans. Transitional provisions apply for concessional instruments already granted. The tariff concession system and free trade preference remain available to importers to manage duty imposts.

Tax Analysis



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Deficit do ldru sforeedge.com.au/.../EY-federal-budget-brief-2016.pdf · EY Federal Budget Brief 2016 2 An investment in smaller businesses, funded mostly by larger businesses, is