The 2019 Federal Budget has been released, forecasting a return to surplus of $7.1Bn next financial year with a continued focus on tax relief. Personal income tax offsets are proposed immediately for low and middle income earners and favourable bracket adjustments are to come into effect by 2024/25. Small business tax relief includes an extension to the instant asset write-off until 30 June 2020 and an increase to the claimable threshold to $30,000 per asset. There are a collection of spending measures aimed at bolstering education, healthcare, defence and “congestion-busting” infrastructure. As with each year, it is important to note that these changes are proposed, and still need to pass through parliament before becoming law.
Let’s see how these changes impact you.
- The SBE instant asset write-off concession on assets costing less than $30,000 will be extended by 12 months to 30 June 2020, up from $20,000.
o Applies to businesses with an aggregated annual turnover of less than $50M (up from $10M).o From the 1 July 2020, the immediate deductibility threshold, and balance at which the pool can be immediately deducted will revert to $1,000.
- This budget has deferred any changes in Division 7A from 1 July 2019 to 1 July 2020. The most contentious of the amendments proposed was to bring quarantined Division 7A loans & Unpaid Present Entitlements into the tax net.
- The Government will support small businesses involved in tax disputes. Businesses without legal representation will be provided with up to two hours of free legal advice regarding the Administrative Appeals Tribunal (AAT) process. When an AAT decision is appealed to the Federal Court, the ATO will pay the small business’s reasonable costs. Other funding by the government will help to fast track tribunal hearings and lower application fees.
- There are tax exemptions on offer for victims of the recent Queensland floods. For primary producers moving forward– the government plans to establish a $3.9Bn emergency response fund.
- There is a package aimed at creating 80,000 new apprenticeships in industries with skills shortages. Incentive payments for employers will be $8,000 per apprenticeship placement, up from $4,000. New apprentices will also be given a $2,000 incentive payment and access to new training hubs.
- Previously announced amendments to R&D tax incentives have been put on hold and there are no new announcements in the 2019-20 budget. The R&D tax incentives remain in place to encourage companies to participate in R&D activities.
- Tax avoidance will continue to be targeted with $1Bn provided over four years to boost the operations of the tax avoidance taskforce. The government collects around $3 for every dollar spent on these programs.
- ABN holders will be made more accountable to the ATO, a hot-spot for black economy activity.
- There are a range of other crackdowns on money laundering, sham contracting, social security reporting and tax debt recovery.
- The Government plans is to increase the low and middle income tax offset (LMITO) from $530 to $1,080, with people earning between $48,000 and $90,000 getting the maximum benefit. This will come into effect when lodging the 2019 income tax return.
- From 1 July 2024 the tax brackets will be arranged in a flatter structure with a view to improving incentives for working. The current 32.5% and 37% tax brackets will be removed and a 30% bracket will take their place and apply for taxable incomes of $45,001 - $200,000. This is a substantial proposal which will need to last two election cycles before any benefits are felt.
- The Medicare Levy rates and Low Income Tax Offsets will be slightly adjusted to combat bracket creep.
- There are measures aimed at assisting older Australians make additional contributions into their super by relaxing some of the age restrictions.
This budget will allow:
o People aged 65 and 66 to make voluntary contributions for themselves without satisfying the work test.o The three-year non-concessional contribution cap rule will be expanded to people aged 65 and 66.o Spouse contributions can be made for people up to age 74 (from age 69).
- The Government will remove a requirement for SMSFs to obtain an actuarial certificate where all members of the fund are in retirement phase for the whole income year. This could save many SMSFs around $200 every year.
- There is new funding for aged care, providing 10,000 new home care packages. Pensioners are to get $75 ($125 for couples) as a one-off cash payment for energy bills.