2018 Federal Budget Summary
The item that may receive the most analysis from the whole of this year’s federal budget will be the increase of the 32.5% tax bracket, and an expansion of the Low Income Tax Offset.
A win for small businesses in this year’s budget sees the retention of the $20,000 instant asset write-off for another 12 months until 30 June 2019. Also a limit will be imposed on the amount of cash payments made to a business.
Following last year’s big changes to the superannuation rules, this year has seen smaller tweaks to the super system. We also note that there will be some compliance related changes to the deduction of personal contributions and the audit cycle of SMSFs.
Bracket adjustment in personal income taxes
The upper threshold for the 32.5% marginal tax rate bracket will increase from $87,000 to $90,000. It will apply from 2018-19.
Moreover, from 1 July 2022, there will be further adjustments made to the brackets.
Low and middle income tax offset
Introduction of a non-refundable tax offset of up to $530 per annum targeted at low to middle income earners. It will affect individuals with taxable income of up to $125,333, and will apply from 2018-19 to 2021-22.
An increase in the Medicare levy low-income thresholds for singles, families, and seniors and pensioners. This will affect low-income earners and will apply for 2017-18.
$20,000 instant asset write-off extended
The availability of the small business $20,000 instant asset write-off has been extended for a further 12 months to 30 June 2019. This concession was previously due to expire on June 30, 2018.
Better targeting the R&D tax incentive
For companies with aggregated annual turnover of $20 million or more, the Government will introduce an R&D premium that ties the rates of the non-refundable R&D tax offset to the incremental intensity of R&D expenditure as a proportion of total expenditure for the year.
Cash Payment Limit
The Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services. It is proposed to apply from 1 July 2019.
Removing tax deductibility of non-compliant payments
A tax deduction will not be allowed for the following where PAYG is not withheld:
- Payments made by businesses to contractors where the contractor does not provide an ABN.
The measure will have effect from 1 July 2019.
Targeted amendments to Division 7A deferred
The start date of the measures to make targeted amendments to Division 7A, announced in the 2016-2017 budget and originally earmarked to take affect 1 July 2018, has been deferred to 1 July 2019.
Application of Division 7A to unpaid present entitlements
The Government is proposing to tighten the rules regarding the application of the provisions of Division 7A to an unpaid present entitlement of a private company. This will commence from 1 July 2019.
Maximum number of super members
The maximum number of allowable members in new and existing self-managed superannuation funds (SMSFs) and small APRA funds is proposed to be increased from four to six. This measure will commence from 1 July 2019.
Deductions for personal contributions
The integrity of the “notice of intent” processes for claiming personal superannuation contribution tax deductions is proposed to be improved. This measure will commence from 1 July 2018.
Voluntary contributions to super funds
An exemption is proposed to be introduced from the work test for voluntary contributions to superannuation, for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements.
Three-yearly audit cycle for SMSFs
The annual audit requirement is proposed to be changed to a three-yearly requirement for SMSFs with a history of good record-keeping and compliance, to commence from 1 July 2019.
Recovery of tax and superannuation debts
The Government will provide $133.7 million to the ATO to continue to deliver on a range of strategies that sustain both an increase in debt collections and an improvement in the timeliness of debt collections.
HEALTH / AGED CARE
Medical services in rural and remote areas
Financial assistance is proposed to be increased for the Royal Flying Doctor Service to improve the delivery and availability of dental, mental health and emergency aeromedical services in rural and remote areas.
National immunisation program
Certain vaccines are proposed to be listed on the National Immunisation Program from 1 July 2018. Vaccinations introduced on the list include those to prevent whooping cough in pregnant women, influenza in people aged over 65, and the prevention of meningococcal in children.
Access to aged care at home
The Government proposes to increase the number of high level home care packages by 14,000 over four years. It will be introduced over four years from 2018-19.
New listings on the pharmaceutical benefits scheme (PBS)
The Government has introduced new and amended listings on the PBS, including Spinraza for the treatment of spinal muscular atrophy. Changes will apply over various dates from 1 January to 1 July 2018.
Great Barrier Reef
The Government will provide $535.8 million over five years from 1 July 2018 to accelerate the delivery of Reef 2050 Plan activities.
The Government will provide $41.0 million over four years from 2018-19 to grow the Australian space industry, including by establishing a National Space Agency.
The Government will provide $24 billion for various transport projects throughout Australia, starting from 1 July 2018. It plans to fund key transport projects all around Australia.
Black economy: Combating illicit tobacco
Importers of tobacco will be required to pay all duty and tax liabilities upon importation, applying from 2019-20.
From 1 July 2019, permits will be required for all tobacco imports (except for tobacco imported by travellers within duty free limits).
Black economy: Taxable payments reporting
The Government will expand the taxable payments reporting system (TPRS) from 2019-20 to three additional industries — security providers and investigation services, road freight transport, and computer system design and related services
High profile individuals, for example sportspeople and actors, will from 2019-20 no longer be able to licence their fame or image to another entity such as a related company or trust.
Tax compliance funding
The Government has set aside $130.8 million for the ATO to increase its compliance activities conducted towards taxpayers and their tax agents.
Denial of deductions for vacant land
The Government will deny deductions for expenses associated with holding vacant land from 2019-20. Denied deductions will not be able to be carried forward for use in later income years.
For further information about how the budget affects you, please contact Venture Private Advisory.