What’s new

31 May 2018

Budget 2018 Highlights

Budget 2018 Highlights

Budget night 2018 has brought with it some unexpected announcements and a few predicted proposals by the government. At the moment all of the below are still proposals and have not yet been passed into legislation.

Personal income tax plan

The major announcement is the 7-year 3-step Personal Income Tax plan, that is aimed at giving tax relief to low and middle-income earners by:

  • Introducing the Low & Middle-Income Tax Offset of up to $530 per year for tax payers earning up to $125,333 pa
  • Increasing the top threshold in the 32.5% tax bracket from $87,000 to $90,000 from 1 July 2018
  • Further increasing the 32.5% tax bracket from 1 July 2022 from $90,000 to $120,000 and increasing the 19% tax bracket from $37,000 to $41,000
  • Flattening the personal tax system by removing the 37% tax bracket completely, so the top threshold of the 32.5% tax bracket will increase from $120,000 to $200,000 from 1 July 2024

The following table reflects the proposed personal tax rates and threshold changes over the next 7 years, excluding the Medicare Levy.

Rate

Current year

2017-2018

2018-19 to

2021-22

2022-23 to

2023-24

2024-25 onwards

0%

$0 - $18,200

$0 - $18,200

$0 - $18,200

$0 - $18,200

19%

$18,201 - $37,000

$18,201 - $37,000

$18,201 - $41,000

$18,201 - $41,000

32.5%

$37,001 - $87,000

$37,001 - $90,000

$41,001 - $120,000

$41,001 - $200,000

37%

$87,001 - $180,000

$90,001 - $180,000

$120,001 - $180,000

N/A

45%

$180,001 +

$180,001 +

$180,001 +

$200,001 +

 

The government confirmed that there would be no increase, as previously proposed, to the Medicare Levy, so this will remain at 2% for the foreseeable future.

Extension to $20,000 instant asset write-off

Another welcome announcement was the extension to the $20,000 instant asset write off scheme. Small business entities with an aggregated annual turnover of less than $10 million will be able to immediately deduct purchases of eligible depreciating assets costing less than $20,000 (or $22,000 if the business is registered for GST) that are acquired and first used or installed by 30 June 2019.

The threshold for instant asset write-off will revert to $1,000 on 1 July 2019.

While the extension of the instant asset write-off scheme will be well received, small businesses need to have the cash flow to enable them to spend the $20,000 on the asset in the first place.

Changes to Division 7A (director’s loans)

The government has proposed changes to Division 7A of the ITAA, which requires funds withdrawn or benefits provided by a private company to related taxpayers be taxed as dividends, unless they are structured as complying loans or another exemption applies.

The impact of these changes on director’s loans in private companies may need to be addressed further. Those operating inside companies will need to review all outstanding director’s loans to make sure compliance with Division 7A rules. The measures come into effect from 1 July 2019.

Expansion of the contractor Payment Reporting System

Additional changes announced for businesses is the extension to the contractor taxable payments reporting system (TPRS) that is currently in place for the building and construction industry. The TPRS will be extended to the cleaning and courier industries from 1 July 2018, with a further extension to security providers, road freight transporters and computer system designers and related services from 1 July 2019.

A new online form is set to make the reporting process easier.

Personal super contributions

Also included in the Budget was an allowance for greater measures to be introduced to ensure individuals who make personal superannuation contributions are submitting a Notice of Intent form with their superannuation fund.

A Notice of Intent form is a requirement for claiming deductions for personal super contributions on income tax returns, however, not all individuals are submitting these to their fund before lodging their tax return.

 

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.   


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