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The Treasurer, The Hon. Josh Frydenberg MP, handed down the Government’s 2019/20 Federal Budget at 7.30pm (AEDT) on 2 April 2019. Wayne Hooton, Small Business Tax Specialist at Accounting Professionals, provides a summary of the key personal tax, business tax and superannuation highlights.

Mr. Frydenberg said the Budget is ‘back in the black’, announcing a budget surplus of $7.1b in 2019/20 and forecasting surpluses of:

  •  $11b in 2020/21:
  • $17.8b in 2021/22; and
  • $9.2b in 2022/23.

This election year Budget was directed towards putting more cash in taxpayer’s pockets through proposed changes to further lower individual taxes, including increasing the low and middle-income tax offset.

For business, the instant asset write-off is proposed to increase for small business and apply to more businesses, with the measure being available for businesses with an annual turnover of less than $50 million to access immediate tax deductions for asset purchases.

Given the slump in house prices, particularly in the Sydney and Melbourne markets, this has led to fears that households will cut back on spending.

This Budget, with more money in the pockets of taxpayers led by lower tax rates, and more businesses encouraged to invest with tax write-off incentives, together with bigger Government infrastructure spending, will be the main drivers for ensuring the continued growth of the Australian economy. 

Personal tax: Budget highlights

  •  The low and middle-income tax offset (LMITO) will be changed so that the tax relief it provides, increases from a maximum of $530 to $1,080 pa for singles; $2,160 for dual income families.
  • This offset will apply for 4 income years, starting in 2018-19. The full benefit will be received by individuals earning between $48,000 and $90,000pa.
  • For taxable incomes between $90,000pa and $126,000, the LMITO will phase out at a rate of 3 cents per dollar, Individuals will receive the benefit through their tax assessment, following tax returns lodged for 2018-19, 2019-20, 2020-21 & 2021-22 financial years. Returns lodged from 1 July 2019 will include the benefit.

Low and middle income tax offset (proposed for 2018-19 to 2021-22) 

Taxable Income (TI)

LMITO

$0 – $37,000

$255

$37,001 – $48,000

$255 + ([TI – $37,000] x 7.5%)

$48,001 – $90,000

$1,080

$90,001 – $125,999

$1,080 – ([TI – $90,000] x 3%)

$126,000 +

Nil

Further rate and threshold changes from 1 July 2022 and beyond. Proposed changes to the 19% threshold, as follows:

Rate

2017-18

2018-19 to 2021-22

2022-23 to 2023-24

Nil

$0 – $18,200

$0 – $18,200

$0 – 18,200

19%

$18,201 – $37,000

$18,201 – $37,000

$18,201 – $45,000

32.5%

$37,001 – $87,000

$37,001 – $90,000

$45,001 – $120,000

37%

$87,001 – $180,000

$90,001 – $180,000

$120,001 – $180,000

45%

$180,001 +

$180,001 +

$180,001 +

Low and middle income tax offset

 

$nil

 

Up to $1,080

 

$nil

Low income tax offset

 

Up to $445

 

Up to $445

 

Up to $700

 Proposed rates and thresholds from 2024-25 onwards

• From 1 July 2024, the 32.5% rate will be reduced to 30%
• From 1 July 2024, the 37% bracket will be abolished (as legislated) 

Rates from 2024-25

New Thresholds from 2024-25

Nil

$0 – 18,200

19%

$18,201 – $45,000

30%

$45,001 – $200,000

45%

$200,000 +

Low income tax offset

Up to $700

Source: Budget Paper No. 2

 

Business tax: Budget highlights

 

Instant asset write-off proposed increased for small business and expanded to medium sized businesses

  • Increase to the instant asset write-off threshold for small business (with an annual turnover of less than $10m).
  • Threshold increased from the already legislated $20,000 to $30,000 per individual item for eligible assets used, or installed ready for use, from 7.30pm (AEDT) on 2 April 2019 to 30 June 2020.
  • This expands on the previously announced proposed threshold increase on 29 January 2019 to $25,000.
  • When legislated, small businesses will be able to immediately deduct purchases of eligible business assets costing less than $25,000 from the period 29 January 2019 to 2 April 2019 (Budget night), then less than $30,000 per individual item to 30 June 2020.
  • Medium sized business (with an annual turnover of $10m or more, but less than $50m) will also benefit from immediate tax write-off for eligible business assets purchased after Budget night to 30 June 2020.

Small Business company tax rate and unincorporated small business tax discount

  • The Government also made mention of the already legislated lower tax rate for small and medium-sized companies with turnovers below $50m. The current rate of 27.5% will be lowered to 25% by 2021-22, which is five years earlier than previously planned.
  • The increase in the unincorporated small business tax offset rate, currently at 8%, will also be fast-tracked, rising to 13% in 2020-21 and to 16% from 2021-22 (up to the existing $1,000 cap).

Superannuation

  • Members of regulated superannuation funds aged 65 or 66 years of age will be able to make voluntary superannuation contributions from 1 July 2020 without needing to satisfy the work test.
  • Currently, individuals aged 65-74 must work at least 40 hours in any 30-day period in the financial year in which the contributions are made in order to make voluntary super contributions.
  • The restrictions on claiming the spouse contribution tax offset will be eased from 1 July 2020, which will give eligibility for 70 to 74-year-old spouses. Currently, those aged 70 and over cannot receive contributions made by another person on their behalf.

GST

  • The Budget papers did not contain any changes affecting GST.

Skills package – new apprenticeships, incentive payment

  • The budget announced a new $525m skills package which will seek to create 80,000 new apprenticeships over 5 years in industries with skills shortages.
  • New incentive payment to employers doubled to $8,000 per placement. $4,000 in total to be paid (with $2,000 paid after 12 months, and $2,000 at completion). This is in addition to the existing employer incentives of $1,500 at commencement and $2,500 at completion.
  • New apprentices in eligible occupations will also receive a $2,000 incentive payment.

Need Help?

Please get in touch with us if you have any queries on how the proposed Budget changes may impact you. 

Wayne Hooton is a small business tax specialist at AP Accounting Professionals.
Contact Wayne on 02 4297 0066 or mail wayne.hooton@accpro.com.au for your Budget related enquiries.