2018/19 Federal Budget – Notable Announcements

Now that the 2018/19 budget has been unveiled it is plainly obvious that there will be an election soon.

We have taken a little bit of extra time to let the dust settle around some of the most relevant measures and this article we will explore their impact.

It is important to note that just because these measures have been announced it does not instantly make them law. They still need to travel through both houses of parliament and receive Royal Assent to be law. We will update you once this happens.

Individuals

Summary: The changes for individuals are centered around a new tax offset and adjustments to the tax brackets. Click the buttons for more information on each measure.

The proposed changes to individual tax rates are presented below:

Rate Current (2018) Proposed (2019)
0% 0 – $18,200 0 – $18,200
19% $18,201 – $37,000 $18,201 – $37,000
32.5% $37,001 – $87,000 $37,001 – $90,000
37% $87,001 – $180,000 $90,001 – $180,000
45% $180,001+ $180,001+

As you can see there is a slight increase to the 32.5% bracket to mitigate ‘bracket creep’ (Taxpayers being pushed into higher brackets due to the effect of wages increasing with inflation)

The government plans to remove the 37% tax bracket entirely from 1st July 2024. This measure is too far in the future and dependent on the outcome of at least two future elections to be taken seriously.


Tax Offsets are a way for a government to provide targeted tax relief to a group of people meeting certain conditions, unlike changes to the tax brackets which impact income passing through the particular bracket. The government is proposing the introduction of the Low & Middle Income Tax Offset which will apply to individuals earning up to $125,333.

Low Income Tax Offset
(2018 & 2019)
Low & Middle Income Tax Offset
(Proposed 2019)
0 – $37,000 Up to $445 0 – $37,000 Up to $200
$37,001 – $66,666 $445 – 1.5% excess over $37,000 $37,000 – $48,000 $200 + 3% of excess over $37,000
$66,667+ Nil $48,001 – $90,000 $530
$90,001 – $125,333 $530 – 1.5% of excess over $90,000
$125,334 Nil

 

Superannuation Changes

This year the changes to Superannuation announced in the budget are much less controversial than previous years, the main ones impacting trustees are as follows:

Currently, the work test restricts the ability to make voluntary superannuation contributions for those aged 65-74 to individuals who self-report as working a minimum of 40 hours in any 30-day period in a financial year.

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.


Currently SMSF’s are required to be audited each year before a tax return can be lodged.

From 1 July 2019 the Government will change the annual audit requirement to a three-yearly requirement for self managed superannuation funds (SMSFs) with a history of good record-keeping and compliance.

Details of how this will operate in practice have not been released i.e. will auditors just audit the third year or all three years every third year?

Current opinion is that this may never be implemented due to push back from industry groups.


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.

 

Small Business Changes

Some of the notable changes affecting small business are listed below:


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.

The Government will extend the taxable payments reporting system (TPRS) to the following industries from 1 July 2019:

  • security providers and investigation services;
  • road freight transport; and
  • computer system design and related services.



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.

The ‘lock out’ laws will continue to be suspended until 30 June 2019

Please note none of this is legislated yet 


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:

  • employees 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

 

Other Changes

Other announced changes that affect multiple entities:

The Government has announced that from 1 July 2019 deductions will be denied for expenses associated with holding vacant land.

Denied deductions under this measure:

  • will not be able to be carried forward for use in later income years;
  • that would ordinarily be a cost base element (such as borrowing expenses and council rates) may be included in the cost base of the asset for CGT purposes; and
  • that would not ordinarily be a cost base element would not be able to be included in the cost base of the asset for CGT purposes.

Expenses associated with holding land will remain deductible where they are incurred after:

  • a property has been constructed on the land, it has received approval to be occupied and is available for rent; or
  • the land is being used by the owner to carry on a business, including a business of primary production.