The 2019 Federal Budget was released on Tuesday night. Here, we’ve summarised some business and tax points that you may need to know.
Small to medium businesses have been identified as clear winners from the budget release.
“Small Business is integral to all local communities.We want small business to prosper and we are backing them to do so, cutting their taxes to 25%, increasing their access to finance with a new $2 billion fund”
– Treasurer Josh Frydenberg.
They are also backing small business by:
Instant Asset Write Off
Increasing the instant asset write-off threshold to $30,000 (from $25,000) to June 2020 and expanding access to medium-sized businesses with an annual turnover of less than $50 million to help them reinvest in their business, employ more workers and grow. Around 3.4 million businesses will be eligible to benefit.
TAX TIP – Assuming relevant legislation is enacted as proposed, the instant asset write-off threshold applicable to small business taxpayers in the 2019 income year is as follows:
– 1 July 2018 – 28 January 2019: less than $20,000.
– 29 January 2019 – before 7.30 pm (AEDT) on 2 April 2019: less than $25,000.
– From 7.30 pm (AEDT) on 2 April 2019 – 30 June 2019: less than $30,000.
Company Tax Rate
Fast-tracking the company tax rate cut to 25 percent for small and medium-sized companies with an annual turnover of less than $50 million and increases to the unincorporated small business tax discount rate.
Up to 80,000 new apprenticeships over five years have also been planned.
Apprentices, including bakers, bricklayers, carpenters, and plumbers, will receive a $2,000 payment, with incentive payments to employers doubling to $8,000 per placement. (ABC News)
Small Business Taxation Division
A new dedicated Small Business Taxation Division would make it easier, cheaper and quicker for small businesses to resolve tax disputes, and this would sit within the Administrative Appeals Tribunal. The intended benefits include individual case managers, a lower application fee and faster decisions made. (Dynamic Business)
Individual Income Tax Payers
Immediate Tax Relief
Taxpayers earning up to $126,000 per year are set to receive immediate tax relief — if the Coalition stays in government and it can secure the support of the Senate.
The government will increase the low and middle-income tax offset, providing tax relief of up to $1,080 for singles or up to $2,160 for dual income families. The offset will be available for 2018-19, 2019-20, 2020-21 and 2021-22 income years.
Individuals with taxable incomes up to $37,000 will have their tax reduced by up to $255. This will increase incrementally for those earning between $37,000 and $48,000. The maximum offset of $1,080 will be available to taxpayers with taxable incomes between $48,000 and $90,000. The offset then gradually reduces to zero at a taxable income of $126,000. The offset will be received as a lump sum on assessment after individuals lodge their tax returns – which for 2018/19 will be as soon as 13 weeks.
If the government gets re-elected, it will look a little something like this:
|IF YOU EARN||IT MEANS THIS MUCH EXTRA |
$$$ IN YOUR POCKET
|$0 – $37, 000||***Up to $255|
|$37, 000 – $48, 000||*** Between $255 and $1, 080|
|$48, 000 – $90, 000||*** $1, 080|
|$90 000 – $126 000||*** Gradual decrease from $1, 080 to $0|
Labor has been supportive of tax benefits for lower income earners, so this has a good chance of passing Parliament.
More than 10 million Australians will benefit, though only 4.5 million will receive the full amount.
High-income earners are also set to benefit under a separate change, albeit far into the future.
All taxpayers earning between $45,000 and $200,000 could have their tax rate reduced from 32.5 percent to 30 percent.
That means 94 percent of taxpayers would pay no more than 30 cents in the dollar. (ABC News)
Check out ABC’s calculator on their ‘Winners & Losers’ page:
Changes to personal income tax rates
The government has proposed the following changes to income tax rates, which is good but it’s a five-year journey and they need to get elected first:
- From 1 July 2022, the Government will increase the upper threshold of the 19% personal income tax bracket to $45,000. The rates below do not include the Medicare Levy.
- From the 2025 income year, the 32.5% marginal tax rate will be reduced to 30%. This is in addition to changes already legislated for 2025, to increase the upper threshold of the (now) 32.5% tax bracket from $120,000 to $200,000 and abolish the 37% tax bracket.
New ABN Regulations
Anyone with an ABN obviously needs to keep up to date with the tax records and returns. Now, the Government is cracking down on those who aren’t.
If you hold an ABN, from July 2021 the Government would make it mandatory for you to file your tax return if you have a tax obligation.
From July 2022, you’d need to provide an annual update on your ABN status and your personal details.
If you’re already lodging your tax returns, then you wouldn’t need to worry! No matter what, though, in 2022 you’ll need to start updating ABN details every year. Something to keep on the calendar. (MYOB)
‘Soft’ Superannuation Related changes
Removing the work test for those aged 65 and 66 years
The Government has announced that it will allow voluntary superannuation contributions (both concessional and non-concessional) to be made by those aged 65 and 66 years without meeting the work test from 1 July 2020 (i.e., from the 2021 income year).
Access to the ‘bring-forward rule’ for those aged 65 and 66 years
The Government has announced that it will allow those aged 65 and 66 to make up to three years of non-concessional contributions under the bring-forward rule (without satisfying the work test).
Under current law, broadly, those aged 65 and over cannot access bring-forward arrangements.
Increasing the age limit for spouse contributions
Individuals up to and including the age of 74 will be able to receive spouse contributions (with those 65 and 66 no longer needing to meet a work test).
Currently, those aged 70 and over cannot receive spouse contributions.
Other note-worthy updates
These might not be on your radar, but they affect business in general and you should still know about them:
- Forecast surplus of $7.1 billion in 2019-2020: the first surplus in over a decade
- A renewal of ATO fudning to extend the opration of the Tax Avoidance Taskforce for a further 4 years
- One-off Energy Assistance Payment of $75 for eligible singles and $125 for eligible couples
- Super: Merging Fund – Government to make permanent the current tax relief for merging superannuation funds.
- Measures to increase the flexibility of superannuation arrangements for recent retirees around the work test, spouse contributions and bring forward arrangements.
- The ATO is investing more money in cracking down on sham contracting. That is employers wrongly calling their employees “contractors” despite making them follow rules and regulations like an employee.
- The Government is reducing skilled migration by 120,000 places over the next four years. If you were thinking of hiring from overseas, this should be on your radar.
Have some questions about some of this may affect you?? Get in contact with us today and one of our tax specialists will be happy to help.