Issue 128 - April 2019 (Budget Special Edition)
The Federal Budget for the 2019/20 year was handed down by the Treasurer on 2 April 2019. We will be considering how these affect each client's individual circumstances and have summarised below the main taxation and superannuation highlights.
These announcements are not yet legislated
The Government is proposing to increase the 19% tax bracket from $41,000 to $45,000 for the income years ending 30 June 2023 and 2024.
The table below show what the proposed tax rates will be for these years:
| Taxable Income
|| Tax Payable (2023 & 2024)
|$0 - $18,200
| $18,201 - $45,000
|| Nil + 19% of excess over $18,200
|$45,001 - $120,000
||$5,092 + 32.5% of excess over $45,000
||$29,467 + 37% of excess over $120,000
||$51,667 + 45% of excess over $180,000
From 1 July 2024 onwards, the Government were proposing to remove the 37% bracket altogether and increase the upper threshold for the 32.5% rate to $200,000. They've now proposed to keep the upper threshold for the 19% as above and decrease the tax rate in the next bracket from 32.5% down to 30%.
The table below shows what the proposed rates will be from 1 July 2024 onwards:
| Taxable Income
|| Tax Payable (2025 onwards)
|$0 - $18,200
|$18,201 - $45,000
|| Nil + 19% of excess over $18,200
|$45,001 - $200,000
|| $5,092 + 30% of excess over $45,000
| $200,001 +
||$51,592 + 45% of excess over $200,000
For the 2019 income year, the maximum offset will be increased from $530 to $1,080 per annum, for individuals between $48,001 and $126,000 taxable income.
The base amount (which is added to the low income offset for those eligible) will increase from $200 to $255 per annum.
From 1 July 2022, in line with increasing the 19% upper bracket from $41,000 to $45,000, the low income tax offset will increase from $645 to $700.
For the 2019 income year, the Medicare levy low-income thresholds will be increased to:
* Note this increases the relevant threshold above
|| (up from $21,980)
||(up from $37,309)
|Singles, seniors & pensioners
|| (up from $34,758)
|Seniors & pensioners families
|| (up from $48,385)
|Each dependent child/student
|| (up from $3,406)
Small businesses (group turnover under $10 million) have previously been able to claim an immediate tax deduction for depreciable assets costing less than $20,000. From 29 January 2019, it was announced this threshold would increase to $25,000 and in the budget, the Government has now announced an increase to $30,000 from 2 April and an expansion to include medium size businesses (with group turnover up to $50 million). This measure is expected to apply until 30 June 2020 when the threshold is due to return to it's previous amount of $1,000.
Currently primary producers and tourism operators may be eligible for a partial refund of LCT paid on eligible vehicles, up to a maximum of $3,000.
Eligible vehicles include 4-wheel and all-wheel drive cars and the refund is claimed by completing a form which is submitted to the Australian Tax Office to assess and refund.
Primary producers are eligible for one refund each financial year but tourism operators can claim on all eligible vehicles purchased.
From 1 July 2019, the government is proposing to increase this maximum refund to $10,000.
Division 7A is an area of the law covering taxation of payments and loans from private companies to shareholders and associates. Key changes to these laws including changes to the acceptable terms and interest rates of allowed loans and inclusion of previously excluded amounts were expected to come into effect from 1 July 2019. These changes have now been delayed until 1 July 2020 to allow for further consultation.
The Government has announced a new Sham Contracting Unit within the Fair Work Ombudsman to be established to target employers who are engaging in sham contracting. Sham contracting is where an employment relationship is presented as independent contracting to allow the employer to avoid paying superannuation, PAYG Withholding, payroll tax or other employer obligations.
The government is looking to strengthen the ABN system in order to disrupt the Black Economy.
From 1 July 2021, ABN holders with an income tax obligation will be required to lodge their income tax return even if not required.
From 1 July 2022, ABN holders will be required to confirm annually the accuracy of their details on the Australian Business Register.
Currently individuals aged 65 to 74 must meet the work test to make voluntary superannuation contributions. The work test requires them to work for at least 40 hours in any 30 day period during the financial year. The Government has announce that the age limit will increase to 67 to align with being eligible for the Age Pension. This measure is expected to apply from 1 July 2020.
The non-concessional contribution limit is currently $100,000 but those under 65 can use the "bring forward" rule to make 3 years' worth (i.e. $300,000) in a single year. The age limit to access the "bring forward" rule will be increased to those under 67 from 1 July 2020. No non-concessional contributions can be made if the members total superannuation balance exceeds $1.6 million.
urrently people aged 70 and over cannot receive superannuation contributions from their spouse. This limit is announced to increase to 75 from 1 July 2020.
There are several Bills which have not passed through the parliament process and if not passed by the time an election is called, these will lapse. If that's the case, they will need to be re-introduced into parliament in order to be made law.
Some of the main Bills affected include:
- The denial of CGT main residence exemption for non-residents – it was proposed that non-residents - no longer be eligible for the main residence exemption. A transition period was due to expire on 30 June 2019.
- Changes to the Research & Development incentive
- Increase the expenditure threshold and link the R&D tax offset to the claimants' corporate tax rate by calculation of claimant rate plus 13.5 percentage point premium
- $4m cap on refundable offsets per annum
- The superannuation guarantee amnesty – this allowed employers to self-correct any unpaid superannuation guarantee charges back as far as 1992. Employers had a window of between 24 May 2018 and 23 May 2019 to voluntary disclose these amounts and would allow employers to claim a deduction for the charges paid.
- Proposed increase to the instant write-off threshold to $25,000 (as discussed above)
These announcements are not yet legislated.
We will monitor these announcements as they progress and will update details in future newsletters.