The Federal Budget was released by the Government on 8 May. Whilst not yet law there are a number of sweeteners intended to attract political support.
Here is a recap on some of the key changes and what you should know about:
Personal Tax Cuts
From 1stJuly 2018 a new tax offset shall be introduced which shall reduce income tax by:
- Up to $200/year if taxable income is less than $37,000/year.
- Up to $530/year if taxable income is between $37,000/year and $48,000/year.
- $530/year if taxable income is between $48,000/year and $90,000/year.
- The $530/year offset reduces 1.5c/$ if taxable income is over $90,000/year.
A commitment has been made by the Government to flatten and simplify the income tax rates for individuals progressively over the next seven years to 2024/25 as well.
- The instant asset write-off for assets costing under $20,000 shall be extended for all small businesses (less than $10 million turnover) until July 2019.
- The Government is committed to the reduction of the company income tax rate of 25% over time for all companies. The opposition and minor parties are debating whether this concession solely apply to businesses under $50 million turnover only.
A number of concessions have been announced to apply from 1stJuly 2019.
These concessions are broadly twofold:
- Greater protection for small Superannuation balances (under $6,000); Superannuation accounts for younger members (under 25 years) or inactive accounts. Protection enables Fund balances in those circumstances not to be unnecessarily eroded by excess fees, charges and insurance.
- Greater flexibility for SMSF’s (Self-Managed Superannuation Fund) including proposals to:
– Increase Fund membership from 4 members to 6 members
– Provide that Fund audits be necessary once every three years (instead of annually)
– More flexibility for recent retirees to contribute to Superannuation.
The Federal Opposition proposes higher personal tax cuts and higher funding for services. It calculates this as affordable by not granting income tax relief to companies turning over more than $50 million/year and by other integrity measures including the reform of negative gearing rules for property investment.
Australian Tax Office (ATO)
The Budget is foreshadowing extra effort and attention by the Tax Office in ensuring compliance with the tax rules. The ATO was a big winner in the Federal Budget with significant extra funding to be provided:
- $130 million extra funding for compliance activities largely individual taxpayers.
- $133 million extra funding to allow for both an increase in debt collections and an improvement in the timeliness of debt collection action for taxpayers owing money.
We also expect extra attention from the Tax Office in tackling the cash economy in line with recommendations from the “Black Economy Taskforce – Final Report”.
- Limiting tax deductions for cash payments, and
- Extending the taxable payments reporting to the other “at risk” industries including trades and personal services like home cleaners.
Other integrity measures recently foreshadowed include work-related expenses audits in particular vehicle expense claim reviews.
these areas relate to your situation, we can explain and help if required.