Budget Overview
The Federal Treasurer, Mr Scott Morrison, has handed down his third budget. Mr Morrison said that the Budget is focused on further strengthening the economy to "guarantee the essentials Australians rely on" and "responsibly repair the Budget".
With a deficit of $18.2 billion in 2017/18 and $14.5 billion in 2018/19, the Budget is forecast to return to a balance $2.2 billion in 2019/20 with a projected surplus of $11 billion in 2020/21.
Individuals
A seven-year personal income tax plan will be implemented by the government in three steps to introduce a low and middle income tax offset, to provide relief from bracket creep and remove the 37% personal income tax bracket.
On completion, this would bring 94% of Australian taxpayers to a rate of 32.5% or less compared with 63% of taxpayers at current levels.
The Treasurer announced an immediate tax relief for low and middle income earners equivalent to around $540 per year.
Medicare Levy
The government is not proceeding with the increase to the Medicare Levy from 2% to 2.5% which was announced in the 2017/18 Federal Budget.
The Medicare Levy low income thresholds for singles, families, seniors and pensioners will be increased from the 2017/18 income year.
Asset Acquisition
The $20,000 instant asset write off will be extended for small businesses with aggregated turnover of less than $10M by another year to 30 June 2019. The assets acquired must be installed and ready for use before 30 June 2019.
The current rules regarding accelerated depreciation for small businesses remain in place. These pooled assets can be depreciated at the initial rate of 15% in the first year.
Income Tax Rates and Thresholds for 2018/19 Onwards
The table below summarises the announced personal tax rate and threshold changes (excluding the 2% Medicare Levy).
|
Rate |
2018/19 to 2021/22 |
2022/23 and 2023/24 |
2024/25 onwards |
|
0% |
$0 - $18,200 |
$0 - $18,200 |
$0 - $18,200 |
|
19% |
$18,201 - $37,000 |
$18,201 - $41,000 |
$18,201 - $41,000 |
|
32.5% |
$37,001 - $90,000 |
$41,001 - $120,000 |
$41,001 - $200,000 |
|
37% |
$90,001 - $180,000 |
$120,001 - $180,000 |
N/A |
|
45% |
$180,001 + |
$180,001 + |
$200,001 + |
|
LITO |
Up to $445 |
Up to $645 |
Up to $645 |
|
LMITO |
Up to $530 |
|
|
Medicare Levy to remain at 2%
LITO – Low Income Tax Offset
LIMTO – Low and Middle Income Tax Offset
Business Operations
Non-compliant payment to employees and contractors and no longer deductible
Businesses will no longer be able to claim deductions or payments to their employees, where they have not met their PAYG obligations. Businesses will be denied deductions on certain payments to contractors which have not met PAYG obligations.
The current system is that, if a contractor does not quote an ABN in a "business to business" transaction, the purchaser is required to withhold an amount at the top marginal tax rate and remit this amount to the Australian Taxation Office. The changes foreshadowed by the Treasurer will mean that failure to do this correctly will render the entire payment non-deductible.
These changes will take effect from 1st July 2019.
Taxable payments reporting system to be expanded
The Taxable Payments Reporting System will be expanded from the 1st July 2019, by inclusion of the following industries:
- security providers and investigation services
- road freight transport
- computer system design and related systems
The first reports for these industries will be required to be submitted in August 2020.
Large government contract tenders required to be tax compliant
The Treasurer announced that businesses seeking to tender for contracts valued at over $4M (including GST), with the Australian government will be required to provide information on the status of their tax obligations.
Limit of cash that a business can receive
The government proposes to introduce a limit to the amount of cash that a business can receive to under $10,000 from 1st July 2019.
This proposal will not affect transactions with financial institutions or consumer to consumer non-business transactions.
Developers
The Treasurer announced that, from 1 July 2019, tax deductions will not be allowed for expenses associated with holding vacant land. These expenses will include interest costs, rates and land tax. The measure will apply to land held for residential or commercial purposes.
The measure will not apply to expenses associated with holding land that are incurred after:
- a property has been constructed on the land, it has received written approval to be occupied and is available for rent; or
- the land is being used by the owner to carry on a business, including a business of primary production.
Superannuation
The Treasurer announced a number of changes relative to superannuation as follows:
Increase in membership - New and existing Self-Managed Superannuation Funds (SMSFs) and small APRA Funds will be allowed to have a maximum of 6 members from 1 July 2019. The present membership limit for superannuation funds is 4 members.Change in audit requirements - The annual audit requirements for Self-Managed Superannuation Funds will be changed to a 3-yearly requirement for SMSFs with a history of good record-keeping and compliance. This change will apply from 1 July 2019.
Preventing inadvertent concessional cap breaches - Individuals whose income exceeds $263,157 and have multiple employers, will be able to nominate that their wages from certain employers are not subject to the superannuation guarantee from 1 July 2018. The measure is intended to ensure eligible individuals can avoid unintentionally breaching the $25,000 annual concessional contributions cap as a result of multiple superannuation contributions.
Improving integrity of personal superannuation contributions - The Australian Taxation Office will modify individual income tax return forms to include a tick box for an individual to confirm that they have complied with the requirements to submit a "Notice of Intent" where they intend to take a tax deduction for personal superannuation contribution.
Superannuation work test exemption for recent retirees - The government will introduce an exemption from the work test for voluntary contributions to superannuation from 1 July 2019 for people aged 65 – 74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements.
Annual cap on passive fees - 3% annual cap will be introduced on passive fees charged by superannuation funds on accounts with balances below $6,000. This change will occur from 1 July 2019.
Banning of exit fees - The government intends to ban exit fees on all superannuation accounts. This change will occur from 1 July 2019.
Some inactive superannuation account balances to be transferred - The government will amend the regulations to ensure that all inactive superannuation accounts with balances under $6,000 are transferred to the Australian Taxation Office. This change will occur from 1 July 2019
Anti-Phoenixing
The government will amend the required laws to provide regulators with additional tools to assist them to deter illegal phoenix activity.
The reforms will include:
- prevent directors improperly backdating resignations to avoid liability or prosecution;- limit the ability of directors to resign when this would leave the company with no directors;
- restrict the ability of related creditors to vote on the appointment, removal or replacement of an external administrator;
- extend the director penalty regime to GST, Luxury Car Tax and Wine Equalisation Tax, making directors personally liable for the company's debts; and
- expand the Australian Taxation Office's power to retain refunds where there are outstanding tax lodgements.
Testamentary Trusts
From 1 July 2019, the concessional tax rates available for minors receiving income from testamentary trusts will be limited to income derived from assets that are transferred from the deceased estate, or the proceeds of the disposal or investment of those assets.