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Federal Budget 2019

 

The new federal budget was released on 2 April 2019. Here are a few highlights.

 

Changes affecting individual taxpayers:

  

Low and middle income tax offset

The government has proposed to increase the Low and middle income tax offset. Accordingly, from 1 July 2018, a non-refundable tax offset in addition to the current low income tax offset will provide tax relief of up to A$1,080 to low and middle-income earners. Taxpayers with taxable income less than $126,000 will be eligible to receive this tax offset. The calculation of the offset benefit depends on the taxable income. Taxpayers with taxable incomes from $48,000 to $90,000 will be eligible to the maximum offset of $1,080. The base amount has been increased from $200 to $255 for the taxpayers with taxable income less than $37,000.

 

Medicare levy low-income thresholds

From 1 July 2018, the Medicare levy low-income thresholds have been increased as follows:

• The threshold for singles will be increased from $21,980 to $22,398

• The threshold for families will be increased from $37,089 to $37,794

• The threshold for single seniors and pensioners will be increased from $34,758 to $35,418

• The family threshold for seniors and pensioners will be increased from $48,385 to $49,304

 

For each dependent child or student, the family income thresholds increase by a further $3,471, instead of the previous amount of $3,406.

 

Personal income tax rates

The government has proposed to increase the 19% tax bracket from currently $37,000 to $45,000 and the 32.5% tax bracket from $90,000 to $120,000 with effect from 1 July 2022.

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Changes affecting businesses:

 

$30,000 immediate write-off for small and medium sized business

The Government has increased the immediate write-off for small businesses from $20,000 to $30,000 with effect from 2 April 2019 until 30 June 2020. It is applicable to the businesses with aggregated annual turnover less than $50 million, which was $10 million before. Eligible businesses will be able to immediately deduct purchases of eligible assets costing less than $30,000 first used or installed ready for use until 30 June 2020. Only a few assets are not eligible (such as horticultural plants and in-house software).

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New Australian Business Number requirements

The Government will strengthen the Australian Business Number (ABN) system to minimise black economy. ABN holders will need to lodge their income tax returns if they have an income tax return obligation from 1 July 2021 otherwise they may lose their ABNs, and confirm the accuracy of their details on the Australian Business Register annually from 1 July 2022.

 

Expanding Single Touch Payroll functions

From 1 July 2020, the Single Touch Payroll data will be covered more information about gross pay amounts and other details. These changes aim to reduce the compliance burden for taxpayers reporting information to other Government agencies.

 

Division 7A changes

From 1 July 2020, the Government will ensure that unpaid present entitlements (‘UPEs’) come within the scope of Division 7A of the ITAA 1936. It was originally proposed to introduce from 1 July 2019. This will apply where a related private company is made entitled to a share of trust income as a beneficiary but has not been paid. This measure will ensure the UPE is either required to be repaid to the private company over time as a complying loan under S.109N of the ITAA 1936 or is subject to tax as a dividend.

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Changes affecting superannuation:

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Removing the work test for 65 and 66 making superannuation contributions

From 1 July 2020, work test requirements for those aged 65 and 66 making voluntary superannuation contributions either concessional or non-concessional will be removed. This is in addition to the work test exemption introduced in last budget, where the exemption applies if the taxpayer meets the work test in the previous financial year, has a total superannuation balance below $300,000 on 30 June of the previous financial year and has not previously relied on this work test exemption.

 

Making bring forward contributions available to 65 and 66

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 work test requirements. Currently, taxpayer aged 65 and above cannot access bring forward contributions.

 

Streamlining certain administration for superannuation funds

From 1 Jul 2020, the Government will streamline certain administrative requirements for superannuation funds including self-managed superannuation funds. If the fund has interests in both the accumulation and pension phases during the income year, the fund can choose to use either segregated or proportionate method to calculate the exempt current pension income. If proportionate method is used, the fund will no longer need to obtain an actuarial certificate for calculating the exempt current pension income.

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Vincent Wan

CPA, Registered Tax Agent

April 2019