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Saving Money

Last night the Treasurer handed down his 2016 Budget.

The good news is that many tradies will be better off under this budget.

We’ve broken the good and bad down for you.

Company Tax Cut

If you run your trade business via a company structure, you’re in line for a tax cut.

In the 2015 budget it was announced that the company tax rate was reducing from 30% to 28.5% from 1 July 2015 for businesses with turnover less than $2 million.

In last night’s budget the size of the cut and the turnover limit was increased, bringing the rate down to 27.5% from 1 July 2016 for businesses turning over less than $10 million.

This doesn’t represent a huge benefit for a typical trade business, but it’s certainly better to keep a few extra dollars in your own pocket rather than gifting it to the ATO.

The cuts will continue each year for the next decade until the rate for all companies is 25%.

Personal Tax Cut

Tradies with a taxable income of more than $80,000 will benefit from a tax cut in this year’s Budget.

Our annual ‘How much do tradies earn’ report shows that around a third of construction tradies are earning close to $80k or more, so many of these workers will benefit.

The benefit comes by moving the tax bracket from $80k to $87k, meaning that the next highest tax rate (37%) won’t kick in for another $7k.

What does this mean in dollar terms?  Well if you earn more than $87k your income tax will reduce by $315 for the year.

Again, not exactly a fortune and unlikely to have any impact on your life, but still better than paying it to the ATO.

Smokers

The bad news is that if you’re a smoker, you’re in for another tax hike.

The tobacco excise will increase by 12.5% each year for the next four years, meaning the cost of a pack of smokes will increase considerably over that time.

No Negative Gearing Changes

There has been plenty of talk about changes to negative gearing in the lead up to this budget.

Building Project

Plenty of people are pushing for change as they believe it will lead to better housing affordability.

But there was also an argument that changes could have a negative impact on the housing industry.

At Trade Risk we don’t pretend for a second to be economists, so we’re not going to say whether or not construction would have been affected by such changes.

However assuming that cuts to negative gearing would have had a negative impact on construction work (particularly on existing homes) then no changes is possibly a good thing for tradies working in residential building.

Roads and Infrastructure

There was plenty of money put aside for roads and infrastructure over the coming years.

Whilst this doesn’t directly affect the dollars in your pocket, it can be seen as a positive.

More infrastructure projects means more work around for tradies, and given how much time we spend getting from job to job, better roads are also a boost.

Overall

Budget 2016 certainly won’t be changing any tradies lives one way or the other, but no one’s going to knock back a tax cut.

If you run your business via a company setup and earn more than $80k in personal taxable income, then you have to consider this budget a win.

Here at Trade Risk we specialise in insurance, not taxation and accounting.  If you require further information we recommend speaking with your accountant.

It is important not to make any financial decisions based on this article without first seeking advice from an appropriate professional.

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