Tag: Federal Budget Highlights

2019 Federal Budget Wrap

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.<//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.

The 2017 Federal Budget

Key Highlights from the Budget

The 2017 Federal Budget was handed down last night. Following is a brief summary of some of the headline measures that may impact you and your business.

Small Business

  • Instant Asset Write-Off – The $20,000 instant asset write-off will be extended by 12 months to 30 June 2018, for businesses with an aggregated annual turnover of less than $10 million. To access the $20 000 write-off, assets must be acquired and installed ready for use in your business by this date. Almost all business assets are eligible (except for buildings, horticultural plants, and in-house software).
  • Access to the CGT Small Business Concessions Tightened – Access to the CGT Small Business concessions will be tightened from 1 July 2017 to deny eligibility for assets which are unrelated to the small business.
  • Foreign Worker Levy – As an incentive to employ Australian workers, from March 2018 businesses that employ foreign workers on certain skilled visas will be required to pay a levy of up to $5 000. This levy will in turn provide revenue for a new Skilling Australians Fund.

Individuals

  • Medicare Levy Increased – From 1 July 2019, the Medicare levy (as distinct from the Medicare levy Surcharge for high-income earners) will be increased from 2.0% to 2.5% of taxable income. Other tax rates that are tied to the top marginal tax rate, such as the FBT rate, will also be increased.
  • HELP Repayments Cut In Earlier – A new set of repayment thresholds and rates under the Higher Education Loan Program (HELP/HECS) will be introduced from 1 July 2018. A new minimum repayment threshold of $42,000 will be established with a 1% repayment rate. Currently, the minimum repayment threshold for 2017/2018 is $55,874 with a repayment rate of 4%.
  • Deficit Levy Expiration – The Government will allow the 2% Deficit Levy for high-income earners to expire on 1 July 2017. This means that the top marginal tax rate which applies at $180, 000 will decrease by 2% to 45% (not including Medicare levy).

Housing Affordability Measures

  • Access to Super for First Home Deposits – Individuals will be able to make voluntary contributions to superannuation of up to $15,000 per year and $30,000 in total, to be withdrawn subsequently for a first home deposit. The contributions can be made from 1 July 2017 and must be made within an individual’s existing contribution caps.  From 1 July 2018, an individual will be able to withdraw these contributions and their associated deemed earnings for a first home deposit. The withdrawals will be taxed at an individual’s marginal tax rate, less a 30% tax offset. Couples saving for a first-home deposit can access this measure and double the benefit.
  • Super Contributions from Downsizing – Individuals aged 65 or over can contribute up to $300,000 from the proceeds of the sale of their home as a non-concessional contribution into superannuation, from 1 July 2018.
  • Travel Deductions Limited – Deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed from 1 July 2017.
  • Plant and Equipment Deductions Limited – Plant and equipment depreciation deductions will be limited to outlays actually incurred by investors in residential real estate properties from 1 July 2017.
  • Main Residence Exemption Denied – Foreign and temporary tax residents will be denied access to the CGT main residence exemption from 9 May 2017. Existing properties held before this time will be subject to transitional arrangements until 30 June 2019.
  • Foreign Owners Taxed – An annual levy of at least $5,000 will be imposed on foreign owners of under-utilised residential property, for example where the property is not occupied.
  • CGT Discount IncreasedSubject to various conditions, the CGT discount for Australian resident individuals investing in qualifying affordable housing will be increased from 50% to 60% from 1 January 2018.
  • Negative Gearing – Despite pre-Budget speculation, the negative gearing rules remain unchanged.

GST

  • New Residential Properties – Purchasers of new residential properties or new subdivisions will be required to remit the GST directly to the ATO (rather than pay it to the seller) as part of settlement from 1 July 2018.
  • Bitcoin Changes – The GST treatment of digital currency (such as Bitcoin) will be aligned with that of money from 1 July 2017. This measure will ensure purchases of digital currency are no longer subject to GST.

Superannuation

  • Related Party Transactions – Opportunities for SMSF members to use related-party transactions on non-commercial terms to increase superannuation savings will be reduced from 1 July 2018.
  • Fund Merger Relief – The current tax relief for merging superannuation funds will be extended until 1 July 2020.

Broader Business Conditions

In good news for the business community, the Budget papers forecast that the economy will rebound and grow at 2.75% in 2017/2018 (up from the current 2.4%); jumping to 3% in 2018/2019. To provide some historical context, average annual economic growth in Australia has been 3.47% from 1960 to 2015.

More Information

Although we’ve covered most of the headline measures, the Budget Papers run into hundreds of pages. To access the papers in full, go to www.budget.gov.au

We will also provide a more detailed coverage in our upcoming July/August bi-monthly magazine as part of your subscription.

2017 Federal Budget Highlights

2017 Federal Budget Highlights

The 2017 Federal Budget was handed down last night. Following is a brief summary of some of the headline measures that may impact you and your business.

Small Business

  • Instant Asset Write-Off – The $20,000 instant asset write-off will be extended by 12 months to 30 June 2018, for businesses with an aggregated annual turnover of less than $10 million. To access the $20 000 write-off, assets must be acquired and installed ready for use in your business by this date. Almost all business assets are eligible (except for buildings, horticultural plants, and in-house software).
  • Access to the CGT Small Business Concessions Tightened – Access to the CGT Small Business concessions will be tightened from 1 July 2017 to deny eligibility for assets which are unrelated to the small business.
  • Foreign Worker Levy – As an incentive to employ Australian workers, from March 2018 businesses that employ foreign workers on certain skilled visas will be required to pay a levy of up to $5 000. This levy will in turn provide revenue for a new Skilling Australians Fund.

Individuals

  • Medicare Levy Increased – From 1 July 2019, the Medicare levy (as distinct from the Medicare levy Surcharge for high-income earners) will be increased from 2.0% to 2.5% of taxable income. Other tax rates that are tied to the top marginal tax rate, such as the FBT rate, will also be increased.
  • HELP Repayments Cut In Earlier – A new set of repayment thresholds and rates under the Higher Education Loan Program (HELP/HECS) will be introduced from 1 July 2018. A new minimum repayment threshold of $42,000 will be established with a 1% repayment rate. Currently, the minimum repayment threshold for 2017/2018 is $55,874 with a repayment rate of 4%.
  • Deficit Levy Expiration – The Government will allow the 2% Deficit Levy for high-income earners to expire on 1 July 2017. This means that the top marginal tax rate which applies at $180, 000 will decrease by 2% to 45% (not including Medicare levy).

Housing Affordability Measures

  • Access to Super for First Home Deposits – Individuals will be able to make voluntary contributions to superannuation of up to $15,000 per year and $30,000 in total, to be withdrawn subsequently for a first home deposit. The contributions can be made from 1 July 2017 and must be made within an individual’s existing contribution caps.  From 1 July 2018, an individual will be able to withdraw these contributions and their associated deemed earnings for a first home deposit. The withdrawals will be taxed at an individual’s marginal tax rate, less a 30% tax offset. Couples saving for a first-home deposit can access this measure and double the benefit.
  • Super Contributions from Downsizing – Individuals aged 65 or over can contribute up to $300,000 from the proceeds of the sale of their home as a non-concessional contribution into superannuation, from 1 July 2018.
  • Travel Deductions Limited – Deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed from 1 July 2017.
  • Plant and Equipment Deductions Limited – Plant and equipment depreciation deductions will be limited to outlays actually incurred by investors in residential real estate properties from 1 July 2017.
  • Main Residence Exemption Denied – Foreign and temporary tax residents will be denied access to the CGT main residence exemption from 9 May 2017. Existing properties held before this time will be subject to transitional arrangements until 30 June 2019.
  • Foreign Owners Taxed – An annual levy of at least $5,000 will be imposed on foreign owners of under-utilised residential property, for example where the property is not occupied.
  • CGT Discount IncreasedSubject to various conditions, the CGT discount for Australian resident individuals investing in qualifying affordable housing will be increased from 50% to 60% from 1 January 2018.
  • Negative Gearing – Despite pre-Budget speculation, the negative gearing rules remain unchanged.

GST

  • New Residential Properties – Purchasers of new residential properties or new subdivisions will be required to remit the GST directly to the ATO (rather than pay it to the seller) as part of settlement from 1 July 2018.
  • Bitcoin Changes – The GST treatment of digital currency (such as Bitcoin) will be aligned with that of money from 1 July 2017. This measure will ensure purchases of digital currency are no longer subject to GST.

Superannuation

  • Related Party Transactions – Opportunities for SMSF members to use related-party transactions on non-commercial terms to increase superannuation savings will be reduced from 1 July 2018.
  • Fund Merger Relief – The current tax relief for merging superannuation funds will be extended until 1 July 2020.

Broader Business Conditions

In good news for the business community, the Budget papers forecast that the economy will rebound and grow at 2.75% in 2017/2018 (up from the current 2.4%); jumping to 3% in 2018/2019. To provide some historical context, average annual economic growth in Australia has been 3.47% from 1960 to 2015.

More Information

Although we’ve covered most of the headline measures, the Budget Papers run into hundreds of pages. To access the papers in full, go to www.budget.gov.au

We will also provide a more detailed coverage in our upcoming July/August bi-monthly magazine as part of your subscription.