In the Budget on Tuesday, the Government announced that
it would increase the instant asset write-off threshold to $30,000 and extend
it to medium sized businesses (those with an aggregated annual turnover of less
than $50 million).
This, and the earlier change announced in January (to
extend the write-off threshold to $25,000) passed both Houses of Parliament
yesterday and is now law (subject to the formality of Royal Assent).
The amendments mean there will be three tiers in the
2018/2019 financial year:
1. $20,000
threshold for depreciable assets that are acquired and installed ready for use
before 29 January 2019. Only available for businesses with an aggregated
turnover less than $10 million.
2. $25,000 threshold for assets first used or
installed between 29 January 2019 and 2 April 2019. Only available for
businesses with an aggregated turnover less than $10 million.
3. $30,000
threshold for assets first used and installed after the 2 April budget
announcement and before 1 July 2020. Available for businesses with a turnover
of less than $50 million.
Going forward, all businesses with a turnover under $50
million are now eligible for a write-off of $30,000. This will be available
under 30 June 2020.
To get the taxation benefit of this in the current financial year, you will need to have the asset installed ready for use on or before 30 June 2019.
Following is a brief summary of some of the headline Budget measures.
BUSINESS
* Instant
Asset Write-Off Boosted and Expanded – Two key changes have been made:
o The write-off
has been extended to medium-sized businesses (those with an aggregated annual
turnover of less than $50 million.
o The threshold
has been increased to $30,000.
Therefore, subject to legislation, businesses with an
aggregated turnover of less than $50 million will be able to immediately deduct
purchases of eligible assets costing less than $30,000 that are purchased and
then first used, or installed ready for use, from Budget night (2 April 2019)
to 30 June 2020.
* Division
7A Changes Deferred – The Government’s proposed Division 7A changes will be
deferred by 12 months to 1 July 2020. To recap, Division 7A is designed to
prevent profits or assets being provided to shareholders or their associates
tax-free. You can read more about these proposed changes – which are not yet
even in draft legislative form – on the ATO website.<https://www.ato.gov.au/General/New-legislation/In-detail/Other-topics/Targeted-amendments-to-Division-7A/>
* Crackdown
on Unpaid Tax and Super by Larger Businesses – The Government will provide more
than $40 million to the ATO to recover unpaid tax and Superannuation Guarantee
owed by larger businesses.
*
Strengthening ABN Rules – This measure imposes new compliance
obligations on ABN holders to retain their ABN. From 1 July 2021, ABN holders
with an income tax return obligation will be required to lodge their income tax
return and from 1 July 2022 confirm the accuracy of their details on the
Australian Business Register annually.
* Tackling
Sham Contracting – The Government will provide more than $9 million to
establish a dedicated unit within the Fair Work Ombudsman to address sham
contracting. This is where employers seek to avoid statutory obligations and
employment entitlements (such as paid leave and superannuation) by
misrepresenting employer/employee relationships as independent contracts.
PERSONAL TAX CHANGES
* Income
Tax Cuts by Increasing Tax Offset – Subject to the passage of legislation, tax
relief will be granted to individuals via the non-refundable low and middle
income tax offset (LMITO). The LIMTO will increase from a current maximum of
$530 per year to $1,080. Further, the base rate will increase from $200 to $255
per year for 2018/2019 through to 2021/2022. Depending on your level of income,
the changes will benefit individuals as follows:
o The LMITO will
now provide a reduction in tax of up to $255 for taxpayers with a taxable income
of $37,000 or less.
o Between
taxable incomes of $37,000 and $48,000, the value of the offset will increase
at a rate of 7.5 cents per dollar to the maximum offset of $1,080.
o Taxpayers with
taxable incomes between $48,000 and $90,000 will be eligible for the maximum
offset of $1,080.
o For taxable
incomes of $90,000 to $126,000 the offset will phase out at a rate of 3 cents
per dollar.
The LMITO will be enjoyed straight after individuals
lodge their income tax returns for the above years.
* Income
Tax Cuts via Rate and Threshold Changes – The following changes are slated for
future income years:
o From 1 July
2022, an increase to the top threshold of the 19% personal income tax bracket
from$41,000 to $45,000.
o From 1 July
2022, an increase in the low income tax offset (LITO) from $645to $700.
* New
Deductible Gift Recipients (DGRs) Approved – The following organisations have
been granted DGR status from 1 July 2019 to 30 June 2024: Australian Academy of
Law, China Matters Limited, Foundation Broken Hill Limited, Motherless
Daughters Australia Limited, Superannuation Consumers Centre Limited, and The
Headstone Project (Tasmania) Incorporated. The Government will also establish a
deductible gift recipient (DGR) general category to enable Men’s Sheds and
Women’s Sheds to access DGR status from 1 July 2020.
SUPERANNUATION CHANGES
* Removal of Work Test for Certain Taxpayers –
The current superannuation work test will be removed for people aged 65 and 66
from 1 July 2020.
* Extending Eligibility for the Bring-Forward
Cap – 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.
* Increase to Age Limit for Spouse
Contributions – The age limit for spouse contributions will increase from 69 to
75 from 1 July 2020.
