AAMT 2016 Budget Summary

AAMT 2016 Budget Summary

General, Government, Industry

 

Opportunities and Implications for AAMT Members

What does the 2016 Federal Budget mean for you as a massage therapist?

Summary

For small businesses, the 2016 Federal Budget appears to be a short-term stimulus package in the lead up to the next Federal election.

Alongside the recent 0.25% reduction in Official Interests Rates, which the Reserve Bank of Australia described as necessary to stimulate consumption and increase inflation, the measures announced in the Federal Budget are likely to have the net effect of stimulating consumption by small businesses and consumers.

The interest rate cut, the extension of the Instant Asset Write Off provisions, the 0.5% reduction in the company tax rate, and the change to higher end personal income tax thresholds, all combine to put more disposable dollars in the hands of small businesses and consumers.

Tax reform and massage therapists

With little said in the area of health funding that will benefit massage therapists the positives are available in the opportunities for sole traders.

The most significant initiatives for massage therapists as small business operators were in the areas of tax reform.

The instant $20,000 assets write off extended to small businesses with an annual turnover of up to $10 million, from the previous $2 million. This will enable massage therapists to purchase essential equipment in years of high taxable income, and derive maximum deductibility to reduce their tax liability.

When introduced in 2015, the provision saw a significant increase in expenditure for eligible items. However, claiming the full write off eliminates the item as a depreciable expense in future years.

For massage-businesses that operate as a Company, the government reduced the tax rate from 28% to 27.5% immediately. The tax rate will continue to be reduced until 2025/26 when it is expected to be 25%.

However, with around 98% of AAMT members registered as Sole Operators (see Table 1), reduced company tax offers little income tax relief.

Table 1: Number of employees per AAMT member
Number of employees % of AAMT members
Sole operators 91.8%
1-2 4. 3.0%
3-5 2.6%
5-10 0.9%
10+ 0.4%

*Note: Data presented in Tables 1 to 5 are derived from the 2014 online survey completed by around 900 AAMT members.

With the vast majority of therapists being sole traders, tax reform in this area has more relevance for AAMT members.

Importantly, from July 1 this year, the upper limit for therapists in the middle income tax bracket will increase to $87,000 per year from $80,000 keeping them within the 32.5% tax rate, as against the higher 37% tax rate.

Depending on the business structure, this may affect AAMT members who fall within this income bracket with little impact for the vast majority of AAMT members (see Table 2).

Table 2: Income range of AAMT members
Income in $ % of members
Under 30,000 51.7%
31,000-40,000 16.1%
41,000-50,000 10.9%
51,000-60,000 11.1%
70,000-80,000 5.3%
80,000+ 4.8%

Significantly, the increase in the tax discount from 5% to 8% for unincorporated small business (individual taxpayers with business income from an unincorporated business), and an extension of the threshold from a turnover of $2 million to less than $5 million will have a direct benefit for all AAMT members.

The tax offset is capped at $1,000.00 per tax year, regardless of the number of business entities that cause you to be entitled to the offset.

Therapists paying superannuation and planning retirement

The Federal Government announced a number of changes to the superannuation scheme.

This included cutting the annual cap on concessional contributions to $25,000 from the current $30,000 ($35,000 for those over 50). As shown in Table 3 below, this may have immediate implications for around 37% of AAMT members depending on their incomes and retirement plans.

 

Table 3: Age of AAMT members
AAMT members age % of AAMT members
25 or younger 5.2%
26-35 14.6%
36-45 26.8%
46-55 32.7%
56-65 16.1%
65 plus 4.6%

People with partners who earn additional income and have combined incomes and superannuation contributions of more than $250,000, a 30% tax on concessional superannuation contributions, up from 15%, was announced.

Positively, for individuals, a Low Income Superannuation Tax Offset will replace the Low Income Superannuation Contribution when it expires on 30 June 2017. Between 60 and 70% of AAMT members, with an adjusted taxable income of $37,000 or less may be eligible to receive an effective refund of some of the tax paid on their contributions, capped at $500.

 

Support for employment to develop your business

Starting April 1, 2017, the Youth Jobs PaTH – Prepare, Trial, Hire will be launched to encourage the training of young job seekers with pre-employment skills and help them hunt for and get jobs.

For small businesses, an internship programme involving up to 120,000 placements over four years will help them employ job seekers who have not worked for six months or more to gain more experience. Job seekers will receive $200 per fortnight in addition to their regular income support payment while in the internship.

Businesses that take on interns will receive an upfront payment of $1,000, and Australian employers will be eligible for a Youth Bonus wage subsidy of between $6,500 and $10,000, depending on the young person’s job readiness.

For AAMT members, employing an intern under the scheme may help to relieve the financial burden of employing additional staff. It may also have the effect of freeing up therapists for marketing, further training or undertaking additional billable treatments.

Infrastructure development and housing and demand for massage services

The government announced the continuing roll out of the $50 billion national infrastructure plan to support economic growth.

It is assumed that economic growth will occur not only through the cost of the infrastructure but also the multiplier effect which will see an increase in demand for services and products provided by local businesses that support these projects and the workers involved in the construction sites. This could include food, catering, hygiene, clothing, transport and health services.

Additional construction jobs may also mean an increase in work place injuries. The reduction in Official Interest Rates and the continuation of Negative Gearing are also likely to continue to support demand for new and renovation housing, which may have a net effect on the incidents of work place injuries.

Health services involved in injury recovery, maintenance and return-to-work services, such as massage, myotherapy, chiropractic, osteotherapy and physiotherapy may see a flow on effect.

For AAMT members, this could also have implications for their training and development plans and the services offered in relation to injury management and rehabilitation.

For example, more than half of the members surveyed in 2014 by AAMT indicated that they would study and become a specialist in rehabilitation, if higher education graduate certificates were industry benchmarked and available as a higher level of recognition than the current Diploma or Advanced Diploma (see Table 4).

 

Table 4: AAMT members preferred areas of specialised study
Area of additional study % of AAMT members
Rehabilitation 58.6%
Chronic Disease 38.6%
Sport and Elite Sport 37.5%
Wellbeing and Therapeutic care 52.5%
None of the above, I do not need more training 12.4%
I would not pay for more training 17.8%

Little benefit for massage therapists in health spending

The benefits that the massage sector may derive from changes to health funding announced in the Federal Budget will be limited.

The conventional health sector and governments are yet to recognise remedial massage in any form as a health service underpinned by research that demonstrates its efficacy and clinical benefits. Additionally, the Federal Government has extended the freeze on the Medicare Benefits Scheme (MBS) for a further two years.

Hence, the inclusion of remedial massage health services in Medicare and associated funding arrangements in the near future is unlikely.

This includes the $213 million announced for Health Care Homes, which the government is promoting as targeting people with complex chronic conditions requiring multiple treatments, under a health plan managed by their GP.

AAMT continues to advocate both state and federal jurisdictions as to the important role that massage can play with a range of health conditions.