Author: Jenny

2019 July/August – Page 1

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JULY/AUG

2019

IS

SN

  2651-8627

Federal Election 

– Tax Washup
All the latest 

TAX NEWS
1 July Tax 

Considerations

MTS

M Y   T A X   S A V E R S

DUE DILIGENCE 

ON BUSINESS 

SALES  

2019 July/August – Page 2

Page 2
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Are You Carrying 

on a Business?

TAXABLE PAYMENTS 

REPORTING EXPANDED

New Tax 

Whistle-Blower Laws

 

Election 

Wash-Up

MY TAX SAVERS

July/August 2019

1

www.mytaxsavers.au

Index

With the Government being returned at the 18 May 

Federal Election, this article looks at what this may 

mean from a tax perspective.                                           

The Taxable Payments Reporting System 

has recently been expanded to several more 

industries. This article informs business owners 

whether they will be caught within these new 

rules and be required to report.          

New laws now protect those who wish to blow the whistle 

on other taxpayers for non-compliance with the tax laws. 

This has implications for taxpayers, business and tax agents

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KEY DATES

Many deadlines are imminent over the 

next couple of months. Don’t be late!                                                       

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Published by My Tax Savers, P.O.Box 2255 Southport BC 4215  Email: info@mytaxsavers.com.au  Phone: 1800 SAVETAX  

Web:  www.mytaxsavers.com.au. My Tax Savers is a trading name of My Tax Savers Pty Ltd ABN 85 059 305 976.

Print Post Approved 100019425

The ATO recently finalised its position on 

when a company will be deemed to be 

carrying on a business. This is important 

for the purposes of accessing a range of tax 

concessions. Does your business qualify?               

2019 July/August – Page 3

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SUPER  

OPPORTUNITIES 

TAX TAKE-AWAYS 

FOR JULY AND AUGUST  

2

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My Tax Savers

From 1 July, two first-time superannuation 

opportunities present themselves. Are you 

eligible to take advantage?                                                            

1 July changes, and a review of your cashflow are two 

key  issues  as  we  enter  the  new  financial  year.                                                   

Due Diligence is an integral step in the purchase and sale of 

businesses. In this article, we examine the Due Diligence process 

and provide an indication to purchasers and vendors alike of the 

sorts of issues likely to be covered in the Due Diligence process.

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GENERAL ADVICE WARNING: The information contained in this publication is general information only. Any advice, if any, is general advice only. Your objectives, financial situation or needs have not been taken into 

consideration. You should consider if this information is suitable for your needs and seek the advice of relevant taxation, superannuation and/or other relevant advisers before any financial product information is acted on.
COPYRIGHT: This newsletter has been written and designed for My Tax Savers Pty Ltd. No part of this publication that is covered by copyright may be reproduced without the express permission of My Tax Savers Pty Ltd.

There are significant matters that still 

must be attended to post-30 June which 

may impact your overall tax position for the 

financial year just passed.  

Post 30 June Tax

 

Considerations

DUE 

DILIGENCE

2019 July/August – Page 4

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MY TAX SAVERS

July/August 2019

3

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JULY 2019

1 JULY 

First day of the 2019/2020 financial year

1 JULY 

Employers with less than 20 employees should start 

transitioning to Single Touch Payroll

14 JULY

2018/2019 Payment Summaries – due date to issue to 

employees

21 JULY

Monthly Activity Statements (June 2019) due for 

lodgement and payment

28 JULY

Quarterly Activity Statements (April-June) due for 

lodgement and payment (if lodging by paper)

28 JULY 

Superannuation Guarantee Contributions (April-June) 

due for payment to superannuation funds or Clearing 

Houses

AUGUST 2019

11 AUGUST 

Quarterly Activity Statements (April-June) due for 

lodgement and payment (if lodging electronically)

14 AUGUST

PAYG Withholding Payment Summary Annual Reports 

– due for lodgement

21 AUGUST

Monthly Activity Statements (July 2019) due for 

lodgement and payment  

21 AUGUST

Final day for eligible monthly GST reporters to elect to 

report annually 

28 AUGUST

2018/2019 

Contractor Taxable Payments Annual 

Reports – due for lodgement 

Where one of these dates falls on a weekend or a public 

holiday, the due date is extended to the next business day

Many lodgement and payment deadlines are 
looming for business including those relating to 
Activity Statements, superannuation, and more.  

KEY DATES

2019 July/August – Page 5

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We can see therefor the importance of 

this final ruling – if you are carrying on a 

business, then you potentially have access to a 

vast range of tax concessions. 

GENERAL POSITION

The final ruling provides that it is not possible 

to state with absolute precision whether a 

company is carrying on a business. Rather 

this is a question of fact, which ultimately 

turns on an overall impression of the 

company’s activities, having regard to the 

indicia of carrying on a business (as identified 

by the courts) including:
•  Whether there is an intention to carry on 

a business

•  The nature of the activities, in partic-

ular whether they have a profit making 

purpose 

•  Whether the activities are: 

- repeated and regular 

- organised in a business-like manner, 

including the keeping of books, records, 

and the use of a system

•  the size and scale of the activities includ-

ing the amount of capital employed in 

them, and

•  whether the activity is better described as 

a hobby, or recreation.

The ATO recently finalised its position on when a company will be 
deemed to be carrying on a business. This is important for the purposes  
of accessing a range of tax concessions. Does your business qualify? 

ARE YOU CARRYING

 

ON A BUSINESS?

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My Tax Savers

INTRODUCTION

On 5 April 2019, the ATO released its long-

awaited final ruling, Taxation Ruling TR 

2019/1, on when a company carries on a 

business for the purposes of:

1. Section 23 of the Income Tax Rates Act 

(1986) as it applied in 2015/2016, and 

2016/2017. During these years, a lower 

corporate tax rate applied to taxpayers 

who were ‘small business entities’ (SBEs). 

We note that in years subsequent to this, 

eligibility for the lower corporate tax rate 

depends on whether a company meets 

the definition of “base rate entity” which 

broadly requires that companies must not 

receive more than 80% of their assessable 

income in passive forms (e.g. interest, 

rent etc.).

2. Section 328-110 of the Income Tax 

Assessment Act (1997) which contains 

the criteria for the SBE test. If this test 

is met, a business can access a range of 

concessions including:

•  CGT concessions – (15-year exemption, 

50% active asset reduction, roll-over, 

retirement concession)

•  Income tax concessions – ($30,000 

instant asset write-off, simplified trading 

TAX TIP

Generally, the $10 million SBE turnover 
threshold applies to these concessions, 
except for:

•  The Small Business Income Tax Offset 

which has a turnover qualification 
threshold less than $5 million

•  The instant asset write-off which 

from 2 April 2019 has a turnover 
qualification threshold of less than $50 
million, and

•  The CGT concessions which continue to 

have a turnover qualification threshold 
of less than $2 million (or alternatively, 
net assets of less than $6 million). 

 

stock rules, roll-over for restructures of 

small businesses, immediate deduction 

for certain prepaid expenses, and the 

small business income tax offset)

•  GST concessions – (accounting on a 

cash basis, annual apportionment of GST 

credits for acquisitions and imports that 

are partly creditable, and paying GST by 

instalments)

•  FBT concessions – (car-parking 

exemption, and work-related devices 

exemption).

2019 July/August – Page 6

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With these broad indicators set down, the 

ruling defines carrying on a business quite 

widely, to the extent that where a taxpayer 

merely has a profit making purpose, it is 

accepted that it is likely the other above 

indicia will support a conclusion that the 

taxpayer is carrying on a business. In the case 

of limited, proprietary limited and no liability 

companies, the final ruling accepts that these 

companies would normally be carrying 

on a business in a general sense if they are 

established and maintained to make a profit 

for their shareholders, and invest their assets 

in gainful activities that have both a purpose 

and prospect of profit. As stated, this is a very 

broad interpretation.

EXAMPLES

With these broad parameters laid down, 

the final ruling then provides a number of 

useful examples, the first of which involves 

an inactive company which ceased trading 

in 2015/2016 with several hundred thousand 

dollars in retained profits in its bank account. 

In subsequent income years, the company’s 

income consisted solely of $12,000 interest 

per year. Despite having no intention of 

resuming trading, because the company’s 

income was consistently greater than its 

expenses (which consisted only of an ASIC 

company fee), it had a purpose and prospect 

of profit each year, and accordingly is deemed 

to be carrying on a business in subsequent 

years. As the following example from the final 

ruling illustrates, holding companies can also 

be carrying on a business:

The ruling then provides the following further 

examples, all of which constitute the ‘carrying 

on of a business’:
•  A company engaged in the preliminary 

activity of investigating the viability of 

carrying on a particular business, and 

invests its share capital of $300,000 in 

interest-bearing bank accounts, earning 

$9,000 per year. No decision has been 

made to carry on the business under 

investigation.

•  Property investment company owns a 

single commercial property which it rents 

out for profit to a third-party. It does not 

service the property, or conduct any other 

activities.

•  A share investment company solely set-up 

for this purpose. $400,000 of investments 

generating $20,000 per year after expens-

es. Even where a third-party manages the 

portfolio.

•  Leasing passenger boats to an unrelated 

party under a commercial lease agree-

ment. Three boat business. Even where 

a management company undertakes the 

chartering.

Perhaps one of the flaws of the final ruling is 

that – unlike the draft ruling it replaces - it 

fails to provide clear examples of what does 

not constitute the carrying on of a business. In 

the draft ruling, these included:
•  Dormant companies with retained profits 

and a bank account in which it earns 

small amounts of interest sufficient only 

to cover its ASIC fees (as opposed to a 

large amount of interest in the earlier 

example in the final ruling)

•  Companies engaged in the preliminary 

activity of investigating the viability of 

carrying on a particular business (by 

contrast, the final ruling – see earlier – 

the company invested its share capital, 

earning significant interest)

•  Family companies with an unpaid present 

entitlement (UPE) from a family trust 

that have not demanded payment from 

the trust and also not entered into any 

arrangement with the trust to receive any 

profit from the UPE 

•  Family companies whose only income is 

trust distributions from a discretionary 

trust which it distributes partly in cash 

to the shareholders with the balance held 

in a non-interest bearing bank account 

pending distribution to other share-

holders. The company also has no other 

assets.

By failing to provide such examples of what 

does not constitute the carrying on of a 

business, the parameters of the carrying on 

a business test are not as well fleshed out as 

they could be. 

TAKE-HOME MESSAGES

All told, the finalised ruling provides a very 

wide definition of ‘carrying on a business’ 

for Section 328-110 and Section 23 purposes. 

It applies to income years both before and 

after its date of issue. Business owners in 

consultation with their advisors should:
•  Review 2015/2016 and 2016/2017 tax 

returns (if within the amendment period) 

for eligibility for the lower corporate tax 

rate

•  If necessary, issue revised distribution 

statements for these years

•  Review eligibility for access to the Small 

Business Concessions for prior years, and 

moving forward.   

ACCOMPANYING DRAFT RULING

Released at the same time as TR 2019/1, was 

draft tax determination TD 2019/D4. This 

draft determination indicates that a company 

whose only business activity is renting out an 

investment property is not eligible to claim the 

CGT small business concessions in relation to 

the disposal of the property, notwithstanding 

that it may carry on a business in the general 

sense for TR 2019/1 purposes. 
The requirement to ‘carrying on a business’ is 

only one of a number of criteria to be able to 

access the CGT small business concessions. 

Importantly, the relevant asset also needs to 

be an ‘active asset’. However, an asset cannot 

be an active asset if its main use is to derive 

rent. As such, the draft determination states 

that the small business CGT concessions 

would not be available upon disposing of the 

investment property.

ATO EXAMPLE 
 HoldCo is a company incorporated in 

Australia. HoldCo owns all the shares 

in SBE Co, which carries on a profitable 

trading business in Australia. 
Possibility A: holding company only 

holds shares in subsidiary
HoldCo's only asset is its shares in 

SBE Co. HoldCo's activities consist 

of investing in shares in SBE Co and 

managing the company group. HoldCo's 

activities are carried on with a purpose 

and prospect of profit and reflect a normal 

commercial business structure. HoldCo 

carries on a business. 
Possibility B: holding company 

holds shares in, and provides loan to, 

subsidiary
In addition to owning all the shares in 

SBE Co, HoldCo provides an interest-free 

loan to SBE Co and provides plant and 

capital equipment that SBE Co uses in its 

business rent free.

HoldCo's income consists of dividend 

income derived from the shares it holds 

in SBE Co. While it does not derive a 

direct return on the loan or provision 

of equipment, these enhance SBE Co's 

profitability and improve the return 

on Holdco's shares in SBE Co. The 

profits are distributed by HoldCo to its 

shareholders.
HoldCo's activities consist of investing in 

shares in SBE Co, managing the group, 

providing a loan to SBE Co and deriving 

interest income from the loan. HoldCo 

carries on a business. 

Election 

Wash-Up

With the Government being returned at the 18 May Federal Election, 
this article looks at what this may mean from a tax perspective. 

Resident Individuals – Proposed Tax Rates

2018/2019

2022/2023

Income threshold $

%

Income threshold $

%

0-18,200

0

0-18,200

0

18,201-37,000

19

18,201-45,000

19

37,001-90,000

32.5

45,001-120,000

32.5

90,001-180,000

37

120,001-180,000

37

180,001- above

45

180,001- above

45

6

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My Tax Savers

PERSONAL INCOME TAX

INCREASED TAX OFFSET
The centrepiece of the recent Federal Budget was immediate tax relief 

for individuals earning up to $126,000. This is in the form of the Low 

and Middle Income Tax Offset (LMITO) which the Opposition also 

states that it supports. 
This will come into almost immediate effect, in that it will apply to 

upcoming tax returns lodged for 2018/2019. Under the changes, the 

reduction in tax provided by LMITO will increase from a maximum 

amount of $530 to $1,080 per year and the base amount will increase 

from $200 to $255 per year for the 2018/2019, 2019/2020, 2020/2021 

and 2021/2022 financial years. Those on incomes between roughly 

$48,000 and $90,000 per year will receive the full $1,080 offset, while 

for individuals with incomes of $90,000 to $126,000 the offset will 

taper off at a rate of 3 cents per dollar for every dollar over $90,000. 

Those who earn less than $37,000 will receive an offset of $255. 
This offset does not need to be claimed separately in tax returns. 

Rather it will automatically be processed and provided to taxpayers 

when they lodge their upcoming 2018/2019 income tax returns. If 

the legislation is not in place by 1 July 2019 when people first start 

lodging their tax returns, the ATO is at this stage proposing to process 

amended assessments to those who lodged before the law is passed to 

include the LMITO entitlement. 

TAX TIP

Once the law is passed (expected to be early July) you may wish 
to get your 2018/2019 records to your Tax Agent and instruct 
them to lodge early rather than in the first part of the 2020 
calendar year (which is the normal lodgement time if lodging 
with a Tax Agent). By doing so, all other things being equal, 
you will bring forward your LMITO entitlement with a potential 
additional refund of up to $1,080 (subject to the above income 
limits, and subject to not otherwise having underpaid tax during 
the year).  

DEFICIT LEVY
With the Opposition losing the election, the Deficit Levy will not 

be re-introduced. This was originally introduced by the Abbott 

Government in the form of a 2% increase to the top marginal tax rate 

which kicks in at $180,000, increasing that top rate from 45% to 47% 

(not including Medicare levy). With the Government being re-elected, 

the top marginal tax rate will remain at 45% going forward. 
INCOME TAX REDUCTION
On Budget night, the Government also proposed that from 1 July 

2022, it would increase the top threshold of the 19% personal income 

tax bracket from $41,000 (as currently legislated) to $45,000. The 

Federal Opposition announced that it supports this change, meaning 

that the following rates will likely apply from 1 July 2022:

MY TAX SAVERS

July/August 2019

5

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2019 July/August – Page 7

Page 7
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Election 

Wash-Up

With the Government being returned at the 18 May Federal Election, 
this article looks at what this may mean from a tax perspective. 

Resident Individuals – Proposed Tax Rates

2018/2019

2022/2023

Income threshold $

%

Income threshold $

%

0-18,200

0

0-18,200

0

18,201-37,000

19

18,201-45,000

19

37,001-90,000

32.5

45,001-120,000

32.5

90,001-180,000

37

120,001-180,000

37

180,001- above

45

180,001- above

45

6

www.mytaxsavers.com.au

My Tax Savers

PERSONAL INCOME TAX

INCREASED TAX OFFSET
The centrepiece of the recent Federal Budget was immediate tax relief 

for individuals earning up to $126,000. This is in the form of the Low 

and Middle Income Tax Offset (LMITO) which the Opposition also 

states that it supports. 
This will come into almost immediate effect, in that it will apply to 

upcoming tax returns lodged for 2018/2019. Under the changes, the 

reduction in tax provided by LMITO will increase from a maximum 

amount of $530 to $1,080 per year and the base amount will increase 

from $200 to $255 per year for the 2018/2019, 2019/2020, 2020/2021 

and 2021/2022 financial years. Those on incomes between roughly 

$48,000 and $90,000 per year will receive the full $1,080 offset, while 

for individuals with incomes of $90,000 to $126,000 the offset will 

taper off at a rate of 3 cents per dollar for every dollar over $90,000. 

Those who earn less than $37,000 will receive an offset of $255. 
This offset does not need to be claimed separately in tax returns. 

Rather it will automatically be processed and provided to taxpayers 

when they lodge their upcoming 2018/2019 income tax returns. If 

the legislation is not in place by 1 July 2019 when people first start 

lodging their tax returns, the ATO is at this stage proposing to process 

amended assessments to those who lodged before the law is passed to 

include the LMITO entitlement. 

TAX TIP

Once the law is passed (expected to be early July) you may wish 
to get your 2018/2019 records to your Tax Agent and instruct 
them to lodge early rather than in the first part of the 2020 
calendar year (which is the normal lodgement time if lodging 
with a Tax Agent). By doing so, all other things being equal, 
you will bring forward your LMITO entitlement with a potential 
additional refund of up to $1,080 (subject to the above income 
limits, and subject to not otherwise having underpaid tax during 
the year).  

DEFICIT LEVY
With the Opposition losing the election, the Deficit Levy will not 

be re-introduced. This was originally introduced by the Abbott 

Government in the form of a 2% increase to the top marginal tax rate 

which kicks in at $180,000, increasing that top rate from 45% to 47% 

(not including Medicare levy). With the Government being re-elected, 

the top marginal tax rate will remain at 45% going forward. 
INCOME TAX REDUCTION
On Budget night, the Government also proposed that from 1 July 

2022, it would increase the top threshold of the 19% personal income 

tax bracket from $41,000 (as currently legislated) to $45,000. The 

Federal Opposition announced that it supports this change, meaning 

that the following rates will likely apply from 1 July 2022:

6

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My Tax Savers

2019 July/August – Page 8

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INVESTORS

CGT DISCOUNT UNCHANGED
The CGT discount will remain at 50% for assets held for 12 months or 

more. The Federal Opposition had proposed to reduce the discount to 

25% for assets purchased on or after 1 January 2020. 
Only the following taxpayers are eligible for the 12-month discount:
•  Individuals (50% discount)
•  Complying superannuation funds (33%)
•  Trusts – including non-complying superannuation funds and 

public trading trusts (50%)

•  Life insurance companies in relation to capital gains from a 

Pooled Superannuation Trust asset (33%).

On taxable capital gains where the asset is held for 12 months or 

more, the maximum effective tax rate payable for superannuation 

funds is 10% (the standard superannuation concessional tax rate of 

15% is reduced by 1/3rd). On the other hand, for both individuals 

and trusts, the discount halves your capital gain (50%). Therefore, 

even if you are on the top individual marginal rate of tax (currently 

47%) the maximum tax rate you will pay on the capital gain if you 

are an individual is 23.5% (i.e. 50% of the 47% marginal rate). The 

notable exclusion here are companies. They are not eligible for the 

discount, however they may be eligible for the CGT Small Business 

Concessions. 

MY TAX SAVERS

July/August 2019

7

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TAX TIP

If you are contemplating selling a CGT asset, you may wish to 
consider if possible delaying the sale until this 12-month mark is 
met and, in doing so, reduce any capital gain by 50%. To reiterate, 
for CGT purposes, the sale date is the contract date or change in 
ownership date - not the settlement date!

NEGATIVE GEARING
With the Government being re-elected, there will be no changes to the 

existing negative gearing rules.  
Negative gearing is an often-used and sometimes misunderstood 

phrase in relation to property and borrowings. When boiled down 

to its basics, negative gearing refers to the practice of accepting a 

loss from an investment with a view to trading that loss off against a 

capital gain. Therefore, for a negative gearing exercise to work, it is 

important to select an asset that will have capital growth – otherwise 

all those losses you have been absorbing while holding the negatively 

geared investment will not have been worthwhile.
An investment is said to be negatively geared if, after taking into 

consideration all of the income and expenses associated with holding 

the asset (i.e. property, shares), the investment shows a negative 

net return i.e. a loss. Whilst all taxpayers can negatively gear, it is 

typically more appealing to taxpayers with higher marginal rates of 

income tax. This is because the ATO allows an offset of the loss from 

the holding of a negatively geared investment against other income. 

Therefore, the higher a taxpayer’s marginal tax rate, the greater the 

benefit from a gearing strategy.
The Opposition had proposed to limit negative gearing to new 

housing from 1 January 2020. All investments made before this date 

were not to be affected by this change and would have been fully 

grandfathered. 

FRANKING CREDITS
Investors (including superannuation funds) will continue to be 

entitled to a refund of excess franking credits in circumstances where 

their own tax payable sits at zero.  

SUPERANNUATION

The Government committed to no new taxes on superannuation last 

month. However, it’s unclear how long this guarantee is in place for. 
Going forward, the Government intends to implement the following 

superannuation policies, most of which were proposed in the recent 

Federal Budget:
REMOVAL OF THE WORK TEST FOR SOME 

OLDER AUSTRALIANS
The Government proposes to remove the superannuation ‘work test’ 

for individuals aged 65 and 66 from 1 July 2020. This will align the 

work test with the eligibility for the Age Pension, which is slated to 

increase to 67 from 1 July 2023. The change will enable an additional 

estimated 55,000 individuals to make concessional and non-

concessional (after tax) voluntary contributions even if they are not 

working. The work test – which requires older Australians to work a 

minimum 40 hours over a 30-day period in order to make a voluntary 

superannuation contribution – will remain in place for those aged 

67-74. 
The suspension of the work test, will enable taxpayers aged 65 and 66 

who are no longer working, or only working a few hours per week, 

to contribute to superannuation and enjoy the tax concessions that it 

provides. Taxpayers in this age bracket will also have automatically 

met a condition of release (i.e. turning 65), and therefore will be able 

to withdraw these contributions as and when they please. 
We note that there is already a one-year exemption in place from 

the work test to allow recent retirees to boost their superannuation 

balances. That is, from 1 July 2019, individuals aged 65 to 74 years 

with total superannuation balances below $300,000 can make 

voluntary contributions to superannuation for 12 months from the end 

of the financial year in which they last met the work test. 
EXTENDING ELIGIBILITY FOR THE 

BRING-FORWARD CAP
In a measure designed to complement the above removal of the 

work test, from 1 July 2020, access to the bring-forward cap will be 

extended from taxpayers aged less than 65 years of age to those aged 

65 and 66. This will enable these individuals to make up to three 

years’ worth of non-concessional contributions, normally capped at 

$100,000 per year, to superannuation in a single year (but no more 

than $300,000 over the three-year total period). This will give older 

taxpayers increased flexibility to save for retirement. Taxpayers in 

this age bracket will be able to contribute lump sums that they have 

on hand into superannuation more quickly; bringing forward the 

accompanying tax concessions – rather than a maximum of $100,000 

per year under the current rules that apply.
INCREASE TO AGE LIMIT ON SPOUSE CONTRIBUTIONS
From 1 July 2020, the Government proposes to increase the age limit 

for spouse contributions from 69 to 74 years. Currently, individuals 

aged 70 and over cannot receive contributions made by another 

person on their behalf. Therefore, individuals up to and including age 

74 will be able to receive spouse contributions, with those aged 65 and 

66 no longer needing to meet a work test. As has been the case in the 

past for recipient spouses aged between 65 and 70, a recipient spouse 

aged 67 to 74 will need to satisfy the work test in order for the super 

fund to accept the contribution. Providing taxpayers with greater 

2019 July/August – Page 9

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DEFEATED PROPOSALS
With the Opposition being defeated, their following 

superannuation changes will not proceed:
•  Individuals under 75 will still be able to claim a deduction 

for their after-tax contributions. The Opposition had 

proposed to reinstate the 10% rule whereby a deduction 

could only be claimed if less than 10% your income was 

earned from employment-related activities. Therefore, if you 

were thinking of making a personal after-tax contribution, 

you may continue to enjoy a tax deduction

•  The non-concessional contribution cap will not be reduced to 

$75,000. It will remain at $100,000 per year. 

•  Limited Recourse Borrowing Arrangement (LRBAs) will 

not be banned. LRBAs are a highly conditional form of 

SMSF borrowing which enable SMSFs, via a separate 

holding trust, to acquire shares and property. 

•  The Division 293 tax threshold will not be lowered to 

$200,000 – it will remain at $250,000  Division 293 tax 

reduces the tax concession on super contributions. An 

individual's income is added to certain super contributions 

made during the year, and compared to this dollar threshold. 

Division 293 tax is payable on the excess over the threshold, 

or on the super contributions, whichever is less. The rate of 

Division 293 tax is 15% 

•  The Superannuation Guarantee rate of 9.5% will not be 

increased. The Opposition had proposed to gradually 

increase the rate to 12%. 

TREASURY EXAMPLE
Mark owns a company, Lat Val Pty Ltd, through which he 

operates a food manufacturing business in the Latrobe Valley 

employing 60 staff. Lat Val Pty Ltd has an aggregated turnover of 

$25 million and a taxable income of $900,000 for the 2019/2020 

income year. Ordinarily Lat Val Pty Ltd would be too large to 

access the instant asset write-off, but the new law means it can 

now benefit.
Lat Val Pty Ltd purchases 10 new commercial ovens 31 

December 2019, at a cost of $12,000 each, exclusive of GST, 

to allow Lat Val Pty Ltd to expand its business and improve 

efficiency.
Under the old law, Lat Val Pty Ltd would depreciate the new 

ovens using an effective life of 15 years. Choosing to use the 

diminishing value method, Lat Val Pty Ltd would claim a tax 

deduction of $400 per oven, a total deduction of $4,000 for the 

2019/2020 income year.
Under the new $30,000 instant asset write-off, Lat Val Pty Ltd 

would instead claim an immediate deduction of $120,000 for the 

purchase of the 10 ovens in the 2019/2020 income year, $116,000 

more than under the old arrangements. This will help the 

business to invest, grow and employ more workers.

 HOUSING DEPOSIT SCHEME

During the Election campaign, the Government pledged to help first 

home-buyers into the market by topping up their 5% deposits with a 

Government guarantee for 15% of the loan. 
Single people earning up to $125,000 or couples earning up to 

$200,000 will be eligible for this first-home loan deposit scheme if 

they have saved 5% of the value of the home.

The Government will set aside $500m of equity through the National 

Housing Finance and Investment Corporation to guarantee loans up 

to a value of 20% of the home. Buyers won’t need to have a full 20% 

deposit and will save around $10,000 by not having to pay lenders 

mortgage insurance.
The scheme is limited to 10,000 first homebuyers, roughly one-in-10 

of the 110,000 Australians who bought their first home in 2018.
The Government has suggested there will be regional caps on the 

value of homes for which it will guarantee a deposit.
Once the first homebuyer has borrowed 95% of the value of the house, 

the Government guarantee lasts until the homeowner refinances.
The Opposition also adopted this policy after it was announced, so 

therefore there is a high likelihood that it will pass into law when 

Parliament resumes. 

BUSINESS

DEPRECIATION
In the Election campaign, the Opposition announced that it would 

introduce an Australian Investment Guarantee, allowing all 

Australian businesses to immediately deduct in the year of purchase 

and installation, 20% of any new eligible asset. The remaining 

balance was to be depreciated under existing rules. 
With the Government winning however, the major depreciation 

reform that was implemented just prior to the Election will remain in 

place. That is, going forward, new purchases of assets under $30,000 

can be written off immediately if your business has a turnover of less 

than $50 million. 

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My Tax Savers

ability to contribute on behalf of their spouse, can be particularly 

advantageous where:
•  the recipient spouse is significantly older (as they be may able 

to access a tax-free superannuation pension earlier than the 

contributing spouse) or 

•  has a low income (as the contributing spouse may be entitled to a 

spouse tax offset) or 

•  where the contributing spouse is unable to contribute personally 

(as they may have already met their contribution limits). 

SMSF MEMBER INCREASE
The Government will again move to have six-member self-managed 

superannuation funds (SMSFs) legislated (up from the current limit 

of four members) despite the proposal being removed from a bill 

introduced earlier this year. This will enable more of your family 

members or other close associates to join your SMSF. On the plus 

side, the greater the pool of funds (that may result from additional 

individuals) the greater the ability to invest. On the downside 

however, it may be more difficult to manage competing interests of 

a larger group of members. For example, younger people may prefer 

a higher risk investment settings than an older person in that SMSF 

who is nearing retirement. 

2019 July/August – Page 10

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This example on the Treasury website, then goes 

onto state that “the Government’s changes mean 

that Lat Vat Pty Ltd. pays less tax, increasing its 

cash-flow by $31,900”. This amount is the tax 

value of the brought-forward deduction ($116,000 

x 27.5% corporate tax rate = $31,900). 
The Treasury statement is somewhat misleading, 

however, because while the company will be 

paying “less tax” under the new law, it would 

pay more tax in subsequent years (but no more 

overall) because no depreciation claim is available 

as it has been exhausted. Consequently, business 

owners should not let tax distort or blur their 

commercial instincts – as they don’t get any extra 

cash than they would otherwise have under the old 

rules (they just get it sooner) they should continue 

to only buy assets that fit within their business 

plan.  However, a return on investment calculation 

will be more favourable due to the time value of 

money.  This might make the difference between 

making a purchase and not making a purchase. So 

while you are paying no more or less tax overall, 

the ability to write-off an asset immediately, 

means you will enjoy a significant cash flow 

benefit under the changes. Cash flow is one of the 

leading causes of small business failure. 
FURTHER TAX CUTS?
The Government has abandoned plans to extend 

the corporate tax cuts to companies with a 

turnover in excess of $50 million. This means 

that moving forward the company tax rates will 

remain as legislated. 

As well as having a turnover of less than $50 million, eligibility for the lower corporate 

tax rate (currently 27.5%) depends on the company being a ‘base rate entity’ (see our 

article on page 4 for a new development in this area).

Income 

year

Aggregated 

turnover 

threshold

Tax rate for base 

rate entities 

under the 

threshold

Tax rate for 

all other 

companies

2018–19 to 

2019–20

$50m

27.5%

30.0%

2020–21

$50m

26.0%

30.0%

2021–22

$50m

25.0%

30.0%

MY TAX SAVERS

July/August 2019

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