As suspected the 2018 Federal Budget was a strategic one that didn't see too many upsets. The general view is that it’s an election budget, hoping to appeal to the swinging voters in middle Australia who hold the Coalition’s chances of a third term in office in their hands.
The government is proposing a three-step, seven-year plan to make personal income tax “lower, fairer and
simpler”. The Budget also contains additional measures to counter the black economy, particularly in response to the final report from the Black Economy Taskforce, including expanding the taxable payments reporting system. Additionally, the Budget contains a range of measures intended to ensure the integrity of the tax and superannuation system.
The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are
available at www.ministers.treasury.gov.au.
We provide a snapshot of the key changes below:
- A seven-year Personal Income Tax Plan will be implemented in three steps, to introduce a low and middle income tax offset, to provide relief from bracket creep and to remove the 37% personal income tax bracket.
- The Government will introduce the Low and Middle Income Tax Offset, a non-refundable tax offset of up to $530 per annum to Australian resident low and middle income taxpayers. The offset will be available for the 2019, 2020, 2021 and 2022 income years and will be received as a lump sum on assessment after an individual lodges their tax return.
- The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2017/18 income year.
- The 2017/18 Federal Budget measure to increase the Medicare levy from 2% to 2.5% of taxable income from 1 July 2019 will not proceed.
- Supplementary amounts (such as pension supplement, rent assistance and remote area allowance) paid to a veteran, and full payments (including the supplementary component) made to the spouse or partner of a veteran who dies, are exempt from income tax from 1 May 2018.
- The ATO will be provided with $130.8m from 1 July 2018 to increase compliance activities targeting individual taxpayers and their tax agents.
- Significant changes to the calculation of the R&D tax incentive will commence for income years beginning on or after 1 July 2018. Additionally, a maximum cash refund will also apply for some entities.
- The $20,000 instant asset write-off will be extended for small businesses by another year to 30 June 2019.
- Payments to employees and contractors are no longer deductible where any amounts that are required to be withheld are not paid, from 1 July 2019.
- The concessional tax rates for the income of minors from testamentary trusts will not be available for trust assets unrelated to the deceased estate.
- Deductions for expenses associated with holding vacant land not genuinely used to earn assessable income will be denied.
- The 50% capital gains discount for managed investment trusts (MITs) and attribution MITs (AMITs) will be removed at the trust level.
- Offshore sellers of hotel accommodation in Australia will be required to calculate their GST turnover in the same way as local sellers from 1 July 2019.
THE BLACK ECONOMY
- A package to reform the corporations and tax laws to deter and disrupt illegal phoenix activity and the
black economy will be introduced.
- The taxable payments reporting system for payments to contractors will be expanded to include security services, road freight transport and computer system design industries, effective from 1 July 2019.
- Businesses can no longer receive cash payments above $10,000 for goods and services, from 1 July 2019.
- The maximum number of allowable members in SMSFs and small APRA funds will be increased to six
from 1 July 2019.
- The annual audit requirement for self-managed superannuation funds will be changed to a three yearly requirement for funds with a history of good record keeping and compliance.
- An exemption from the work test for voluntary contributions to superannuation will be introduced
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.
- Insurance arrangements for certain superannuation members will be changed from being a default framework to being offered on an opt-in basis.
- A 3% annual cap will be introduced on passive fees charged by superannuation funds on accounts with balances below $6,000, and exit fees on all superannuation accounts will be banned.
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