Federal Budget Highlights 2018-19
A budget to strengthen the economy, create jobs and cut taxes was the promise of this year’s Federal Budget. We have put together some of the tax and superannuation Federal Budget highlights, that may be of particular interest to our clients.
Seven-year Personal Income Tax (PIT) Plan
The Government will introduce a low and middle-income tax offset of up to $530 per annum, to provide relief from tax liability and remove the 37% (PIT) bracket. From 1 July 2024, the 32.5% bracket will apply to taxable incomes of $41,001 to $200,000.
Retaining the Medicare Levy at 2%
The Medicare Levy will remain at 2% and will not increase as previously advised in last year’s Budget.
Extending the $20,000 immediate write-off for small business
The Government will extend the $20,000 immediate write-off of eligible assets, for small business, by a further 12 months to 30 June 2019. This will be for businesses with an aggregated turnover of less than $10 million.
Removing tax deductions for payments where withholding obligations have been disregarded
From 1 July 2019, businesses will no longer be able to claim a deduction for wages to their employees where they have not withheld any PAYG from these payments if there is a requirement to do so.
Economy-wide cash payment limit
From 1 July 2019, the Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services. Large cash payments can be used to avoid tax and to launder money from criminal activity.
Contractor payment reporting system
This was first introduced to the building and construction industry and was extended to the cleaning and courier industries from 1 July 2018. The Government will expand this system to include security providers, road freight transport, computer system design and related services.
Exemption from the work test for voluntary super contributions
This will commence from the 1 July 2019, for people aged 65-74 with balance below $300,000 in the first year that they do not meet the work test requirements. Under current law, the work test restricts the ability to make voluntary super contributions for people of this age if they don’t work a minimum of 40 hours in any 30-day period in the financial year.
Changes to insurance in superannuation
Insurance within superannuation will move from a default framework to an opt-in basis for: members with low balances of less than $6,000; members under the age of 25 years; and members whose accounts have not received a contribution in 13 months and are inactive.
Capping passive fees and banning exit fees
From 1 July 2019, the Government will introduce a 3% annual cap on passive fees charged on super fund accounts with balances below $6,000 and will ban exit fees on all super accounts.
Deductions denied for vacant land
The Government will deny deductions for expense on holding vacant land, including interest. These deductions will be made available once a property has been built on the land, it has received approval to be occupied and is available for rent. Denied deductions can be included in the cost base of the land.
Compliance activities targeting individuals and their tax agents
The Government will provide $130.8 million to the ATO from 1 July 2018 to increase audit activities targeting individual taxpayers and their tax agents. It will allow the ATO to detect incorrect reporting of income, such as foreign income of high wealth individuals.
The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.
