2019 Federal Budget
Last night saw Federal Treasurer Josh Frydenberg hand down his first budget and one that is predicted to end with a budget surplus. With a federal election right around the corner there simply won't be time for the Government to pass much of the legislation required to enact the budget in full, however there are some immediate impacts that will affect businesses and their owners.
Personal Income Tax Cuts
The government announced an immediate expansion of the low-mid tax offset which will first be applied when individuals lodge their June 2019 income tax returns. The maximum offset will increase from $530 to $1,080. The offset is phased in for taxable incomes up to $48,000, remains at $1,080 for incomes up to $90,000 and then is phased out to incomes of $126,000. This offset is not taken into account when employers calculate PAYG withholding amounts and as such will be paid out as a 'bonus' when the income tax return is lodged.
The Government's longer term goal is the flattening of the individual tax tables with the result being that from 1 July 2024 there will be just three personal tax rates of 19%, 30% and 45%.
Instant Asset Write-off - Small & Medium Sized Businesses
Businesses with (grouped) turn-over up to $50 million will be able to immediately deduct the purchase price of assets costing up to $30,000. The immediate deduction will apply to assets first installed and ready for use after budget night (2 April 2019) and before 30 June 2020. This is an extension of the existing small business instant asset write-off which, for business with (grouped) turn-over of less than $10 million, could previously deduct assets with a purchase price of $20,000, $25,000 and now $30,000, depending on when the asset was first installed and ready for use.
Changes to Division 7a
Changes to division 7a loan arrangements will be delayed by 12 months and subject to further Government review. In response to significant feedback on the operation and lack of clarity of the new rules, previously due for implementation on 1 July 2019, the Government has announced they will defer application of any changes to the Division 7a regime until 1 July 2020.
Changes will also be made to allow individuals aged 65 and 66 to make voluntary superannuation contributions from 1 July 2020 without needing to meet the work test. The Government also announced their intention to increase the age limit for making spouse contributions from 69 to 74 from 1 July 2020. Superannuation contribution rules are still a complex area subject to one-off exemptions and super balance limits. Advice should be sought before modifications to existing superannuation contribution plans are made.
Investing in compliance activity remains a key area where the Government plans to make 'budget savings' and in this year's budget the announcements centred around ensuring that big businesses are meeting their PAYG withholding and super obligations, an expansion in the data collected from employers via the single touch payroll initiative for use in assessing the income of welfare recipients and implementation of annual compliance and information reviews for all ABN holders.
The government will also put more money towards investigating and prosecuting sham contracting arrangements. Businesses with significant contractor arrangements should expect additional ATO review and audit attention. No doubt the ATO will be angling for a big scalp that will generate plenty of media attention.
See our Federal Budget Tax and Accounting Overview for further details on the above highlights as well as some of the other policy announcements affecting businesses and their owners.
As usual, please do not hesitate to call us on (02) 9891 6100 should you wish to discuss how any of the points raised in the report specifically affect you, or click here to send us an email.
Fergus Roughley, Director
Spry Roughley Services Pty Limited
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