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Budget 2016 Home Page Budget Economic and Fiscal Update 2016

Tax Policy Changes

This section details the material changes to forecast tax revenue since the Half Year Update as a result of revenue and spending initiatives. Table 10 shows a breakdown of the changes and the supplementary text describes each initiative.

Table 10 - Tax forecasting effects of Budget Update initiatives
Year ending 30 June
$ millions
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
Total
5 years
10% tobacco excise rate increases .. 5 70 139 211 425
NRWT & AIL changes .. 7 21 37 51 116
Look Through Company review .. .. (25) 3 (7) (29)
GST on cost of raising debt capital .. (3) (10) (10) (10) (33)
Business tax package .. (21) (159) (67) (113) (360)
Other .. (1) 2 (1) (1) (1)
Total .. (13) (101) 101 131 118

Source: The Treasury

Budget Update initiatives

10% tobacco excise rate increases

Tobacco excise rates will be increased by 10%, in addition to the regular CPI-inflation indexation increases, on each 1 January from 2017 to 2020 inclusive.

Non-resident Withholding Tax (NRWT) and Approved Issuer Levy (AIL) changes

A number of measures to strengthen NRWT and AIL rules to ensure that these are not circumvented, and apply as intended.

Look Through Company (LTC) review

A number of changes were made to ensure that the LTC rules remain appropriately-targeted and to not impose unnecessary costs. Changes include:

  • the removal of RWT on fully-imputed dividends between companies
  • the removal of deduction restrictions for most LTCs
  • a correction to the entry tax formula for entry into the LTC regime, and
  • clarification to the valuation basis for debt remission.

GST on cost of raising debt capital

Changes ensure that GST can be deductible in relation to costs associated with a normal taxable business raising capital.

Business tax package

A number of measures aimed at reforming provisional tax and reducing compliance costs for small businesses. Changes include:

  • the elimination of use-of money interest for the vast majority of provisional taxpayers
  • the removal of the 1 percent monthly penalty on new debt, and
  • allowing contractors to select a withholding tax rate that better suits their needs.

Other initiatives

The 'Other' line in table 10 aggregates a number of smaller initiatives.

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