federal-budget-australianFederal Budget 2018-2019 from Tax Perspective

Individuals

2018-19 Federal Budget – Personal Income Tax Plan

Key Points:

  • The Treasurer announced that the Government will introduce a seven-year Personal Income Tax Plan consisting of:
  • an increase to the 32.5 per cent personal income tax bracket from $87,000 to $90,000 — from 1 July 2018;
  • a non-refundable Low and Middle-Income Tax Offset of up to $530 per annum to be received as a lump sum on assessment by eligible Australian resident taxpayers — for the 2018–19 to 2021–22 income years only and an increase to the Low-Income Tax Offset from $445 to $645 — from 1 July 2022;
  • an extension of the 19 per cent personal income tax bracket from $37,000 to $41,000 and a further increase to the 32.5 per cent personal income tax bracket from $90,000 to $120,000 — from 1 July 2022;
  • a further extension of the 32.5 per cent personal income tax bracket from $120,000 to $200,000. The top marginal tax rate of 45 per cent will then apply to taxable incomes exceeding $200,000 — from 1 July 2024.

2018-19 Federal Budget – Retaining the Medicare Levy at 2 per cent

Key Points:

  • The Government will not proceed with the 2017–18 Federal Budget proposal to increase the Medicare levy rate from 2.0 to 2.5 per cent from 1 July 2019.
  • Consequential changes to other tax rates linked to the top personal tax rate, such as the fringe benefits tax rate, will also not proceed.

2018-19 Federal Budget – Increase in Medicare Levey low income thresholds

Key Points:

  • The Treasurer announced that the Government will increase the Medicare levy low income threshold from the 2017–18 income year for:
  • The threshold for Singles will be increased from $21,655 to $21,980;
  • The Families threshold for will be increased from $36,541 to $37,089;
  • The threshold for Single Seniors and Pensioners will be increased from $34,244 to $34,758;
  • The Family threshold for Seniors and Pensioners will be increase from $47,670 to $48,385;
  • The family income thresholds for Each Dependent Child-student increase from $3,356 to $3,406.
  • The increase adjusts the thresholds to take into account increases in the CPI.

Small Business

2018-19 Federal Budget – Further extending the small business immediate deductibility asset threshold

Key Points:

  • The Treasurer announced that the Government will extend the $20,000 instant asset write-off by a further 12 months to 30 June 2019 for businesses with aggregated annual turnover of less than $10 million.
  • Small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019.
  • Trusts

2018-19 Federal Budget – Extending anti-avoidance rules for circular trust distributions

Key Points:

  • The Government announced that — from 1 July 2019 — it will extend to family trusts the specific anti-avoidance rule contained in Division 6D of Part III of the ITAA 1936 that applies to other closely held trusts that engage in circular trust distributions.
  • Currently, family trusts are excluded trusts for this purpose and are not required to make a valid trustee beneficiary statement when they distribute an amount of net income to another trust in a way that avoids any tax being paid on that amount.

2018-19 Federal Budget – Removing the CGT discount at the trust level for Managed Investment Trusts and Attribution Managed Investment Trusts (AMITs)

  • The Government announced that — for payments made from 1 July 2019 — it will prevent Managed Investment Trusts (MITs) and Attribution Managed Investment Trusts (AMITs) from applying the 50 per cent CGT discount at the trust level.
  • The measure will allow MITs and AMITs that derive a capital gain to continue to distribute this income as a capital gain that can be discounted in the hands of the beneficiary, but it will prevent beneficiaries that are not entitled to the CGT discount in their own right from getting a benefit from the CGT discount being applied at the trust level.

Black Economy Package

2018-19 Federal Budget – Removing tax deductibility of non-compliant payments made to employees and contractors

Key Points:

  • The Government announced that it will amend the law to ensure that — from 1 July 2019 — businesses will no longer be able to claim deductions for payments made to:

Employee where the required PAYG withholding has not been made; and

Contractors who do not provide an ABN and where the required PAYG withholding has not been made.

Key Points:

  • The Minister for Revenue and Financial Services announced that the Government will introduce an economy-wide cash payment limit of $10,000, applying to payments made to businesses for goods and services from 1 July 2019. Payments above the $10,000 threshold will have to be made through the banking system.
  • Transactions with financial institutions or consumer to consumer non-business transactions will not be affected.

Superannuation

2018-19 Federal Budget – Preventing inadvertent concessional contribution cap breaches by certain employees 
Key Points:

  • The Treasurer announced that — from 1 July 2018 — the Government will allow individuals whose income exceeds $263,157 and who have multiple employers to nominate that their wages from certain employers will not be subject to the superannuation guarantee (SG).
    This measure will allow eligible individuals to avoid unintentionally breaching the $25,000 annual concessional contributions cap as a result of multiple compulsory SG contributions. Breaching the cap otherwise results in these individuals being liable to pay excess contributions tax, as well as a shortfall interest charge.
    2018-19 Federal Budget – Better integrity over personal superannuation contributions deductions
  • The Treasurer announced that — from 1 July 2018 — the Government will provide $3.1 million to the ATO over the forward estimates to improve the integrity of the ‘notice of intent’ (NOI) processes for claiming deductions for personal superannuation contributions.
    The additional funding will enable the ATO to develop a new compliance model, and to undertake additional compliance and debt collection activities. From 1 July 2018, the ATO will modify income tax returns to alert individuals to the NOI requirements with a tick box to confirm they have complied. The ATO will use the additional funding to:
  • undertake additional compliance activities, including developing a new compliance model;
  • modify income tax returns to require a confirmation that the individual has complied with the NOI requirements; and
  • Provide guidance to individuals.

2018-19 Federal Budget – Work test exemption for recent retirees

Key Points:

  • The Treasurer announced that — from 1 July 2019 — the Government will introduce an exemption from the work test for voluntary contributions to superannuation, for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements.

The work test exemption will give recent retirees additional flexibility to get their financial affairs in order as they transition to retirement.

2018-19 Federal Budget – Increasing the maximum number of allowable members in SMSFs and small APRA funds

Key Points

  • The Treasurer announced that — from 1 July 2019 — the Government will increase the maximum number of allowable members in new and existing self-managed superannuation funds (SMSFs) and small APRA funds from four to six.

This is intended to provide greater flexibility for joint management of retirement savings, in particular for large families.
This measure was previously announced on 27 April 2018 by the Minister for Revenue and Financial Services, Kelly O’Dwyer MP.


Reference:

Federal-Budget-2018-19