Some would say it was a boring budget..no surprises from a Liberal government in an election year.
Tax cuts, no changes to super, lots of feel good, and nothing too controversial.
Here are some of the relevant tax proposals that could affect you...
Economy is 'back in black'
Treasurer Josh Frydenberg last night handed down the Federal Budget, and predicted a budget surplus of $7.1 billion for the year-ending June 2020. Surpluses are then projected to increase to $11 billion in 2020-21 and $17.8 billion in 2021-22 before easing to $9.2 billion in 2022-23. The budget focuses on 'restoring the nation's finances', strengthening the economy to create more jobs and to 'guarantee the essential services'.
Income tax cuts
In the Budget, the Government announced it will provide a further reduction in tax through the non-refundable low and middle income tax offset (LMITO).
Under the changes, the reduction in tax provided by LMITO will increase from a maximum amount of $530 to $1,080 per annum and the base amount will increase from $200 to $255 per annum for the 2018-19, 2019-20, 2020-21 and 2021-22 income years. The LMITO will be received on assessment after individuals lodge their tax returns for the 2018-19, 2019-20, 2020-21 and 2021-22 income years. This is designed to ensure that taxpayers receive a benefit when they lodge returns from 1 July 2019.
From 1 July 2022, the Government proposes to increase the top threshold of the 19% personal income tax bracket from $41,000 to $45,000.
From 2024-25, the Government said it would reduce the 32.5% marginal tax rate to 30%. This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates. In 2024-25 an entire tax bracket, the 37% tax bracket will be abolished under the Government's already legislated plan.
With these changes, by 2024-25, around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less.
Small business instant asset write-off has been increased from 2 April 2019 for business assets under $30,000 for businesses with a turnover under $10 million (as per last year).
Small businesses can continue to place assets which cannot be immediately deducted into the small business simplified depreciation pool and depreciate those assets at 15% in the first income year and 30% each income year thereafter. The pool balance can also be immediately deducted if it is less than the applicable instant asset write-off threshold at the end of the income year (including existing pools). The current "lock out" laws for the simplified depreciation rules (ie these prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt out) will continue to be suspended until 30 June 2020.
Medium business instant asset write-off
Medium sized businesses (ie, those with aggregated annual turnover of $10 million or more, but less than $50 million) will also be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from Budget night to 30 June 2020.
Division 7A loans
The Government announced that it will defer the start date of the 2018-19 Budget measure, Tax Integrity - clarifying the operation of the Division 7A integrity rule, from 1 July 2019 to 1 July 2020.
ATO gets $1 billion to target Tax avoidance
The Government will provide $1 billion over 4 years from 2019-20 to the ATO to extend the operation of the Tax Avoidance Taskforce and to expand the Taskforce's programs and market coverage. The Taskforce undertakes compliance activities targeting multinationals, large public and private groups, trusts and high wealth individuals. This measure is intended to allow the Taskforce to expand these activities, including increasing its scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.
Superannuation There weren't too many changes to super; however here are a few of the key measures impacting SMSFs from 1 July 2020:
- Removing the requirement for SMSF's solely in the retirement phase using the proportionate method to obtain an actuarial certificate
- Removing compulsory deemed segregation, meaning a fund with a non-retirement phase account would use the proportionate method but allows a fund to choose to employ a segregated asset strategy
- Changes to the voluntary contributions rule where persons aged 65 and 66 are able to make voluntary contributions, including use of the bring-forward rule, without meeting the work test
- Persons up to and including age 74 being able to receive spouse contributions
No mention of any changes to SMSF audits. You may recall in last year's budget, it was announced that certain Self Managed Super Funds (SMSF) would only be required to have an audit every three years.
Please call or email us to discuss how these changes will affect you.