The Australian Federal Government Treasurer, Scott Morrison, has aimed to appeal to a broad range of Australians with his third budget. In what is widely perceived to be an election Budget (and certainly the last full Budget before the next Federal election), the Treasurer said that the Budget is forecast to return to a modest surplus in 2019-2020. This is a year ahead of what was previously expected.
Following are some of the election sweeteners and a snapshot of the 2018 Federal Government Budget:
Personal Tax Cuts
This is the 2018 Budget centrepiece. The Federal Government will give some tax relief for anyone earning under $90,000.
For taxpayers with taxable income of $37,000 or less, the Low and Middle Income Tax Offset will provide a benefit of up to $200. Between taxable income of $37,000 and $48,000, the value of the offset will increase by 3 cents in the dollar up to the maximum offset of $530. It is also noted that taxpayers with taxable incomes between $48,000 and $90,000 will be eligible to receive the $530 maximum offset. The new offset will phase out at a rate of 1.5 cents per dollar between taxable income between $90,001 and $125,333.
Implemented to address the issue of tax bracket creep, the government is also raising the $87,000 (32.5 percent) threshold to $90,000 in the 2019 financial year (01/07/2018 – 30/06/2019).
But wait! There’s more. In the 2022–23 financial year, the 19 percent threshold will rise from $37,000 to $41,000, and the 32.5 percent threshold will rise from $90,000 to $120,000.
But that’s not all. In 2024–25, the government will scrap the 37 percent tax bracket completely. Therefore if you earn $41,000 – $200,000, the highest tax bracket that will impact you will be 32.5 percent.
This sugary announcement is dependent on nothing changing over the next 7 years and of course that will happen.
Continuation of Small Business tax concessions
Many of the existing tax concessions for small businesses over the past few years will continue, despite there being no further direct tax relief in the budget. The government will be extending the $20,000 instant asset write-off for a further 12 months to 30 June 2019.
From 1 July 2019, pensioners in paid work will be able to earn up to an extra $1,300 a year before seeing any impact on their pension. Self-employed pensioners will for the first time have the ability to earn up to an extra $7,800 a year. As it stands, pensioners can earn up to $250 a fortnight without impacting pension eligibility. This change will see that figure increased to $300.
Also from 1 July 2019, he Pensions Loan Scheme will be boosted to enable everyone over pension age (including full rate pensioners and self-funded retirees) to effectively mortgage their home to the Government to access fortnightly payments. These payments are now as much as one-and-a-half times the pension rate. Based on current rates this would allow full Age Pensioners to increase their annual income by up to $11,799 for a single or $17,787 combined for couples.
An additional 14,000 high-level home care support packages will also be introduced over the next four years.
Businesses will be able to access financial incentives of up to $10,000 to hire mature-age (Australians over the age of 50) employees.
Young people from regional, rural and remote communities enrolling in university courses will find it easier to get access to Youth Allowance payments while they are studying away from home.
Eligibility for these payments is based on parental income. The threshold and assessment period for that eligibility test will change so that students whose parents earn up to $160,000 will now be eligible for support. The threshold will increase by $10,000 for each child in the family unit, and will now be calculated for the financial year before the student begins independent study.
Vacant Land owners
People who own vacant blocks of land will no longer be able to claim tax deductions against them from July 2019. The restriction won't apply to any expenses incurred after construction begins on the vacant block or any land being used by owners to carry out business, such as farmers.
"High-profile individuals" will no longer be able to take advantage of lower tax rates by licensing their fame or image to another entity. Currently, these individuals can license the right to use their image — and the right to receive income from it — to another entity like a trust. This creates the opportunity to take advantage of different tax treatments. The government wants to end this practice to ensure celebrities' tax bills are fair.
Superannuation & Self Managed Superannuation Fund (SMSF)
Exit fees charged upon changing funds will be banned as of 1 July 2019 and passive fees charged on accounts with balances of less than $6,000 will also be capped at 3 per cent.
Superannuation funds will be stopped from forcing those aged under 25 or with low balances to pay for life insurance policies they have not asked for or do not need.
The SMSF member limit will increase from 4 to 6.
The SMSF’s annual audit requirement is proposed to be changed to a three-yearly requirement for SMSFs with a history of good record-keeping and compliance. This new measure is intended to start on 1 July 2019
More Tax Audits
The Tax Office will receive close to $600 million in additional funding in a bid to increase compliance activities targeting individual taxpayers, with audits and prosecutions tipped to surge.
Plans to battle the Black Economy
The Government wants to crack down on the black economy. It argues many payments are falling outside the tax system. A number of measures will be introduced in a bid to crack down on tax evasion, the black market and the cash economy. These include:
Extra resources will be given to enforcement agencies to detect and disrupt black economy participants.
The government’s procurement procedures will be changed to incentivise tax compliance in supply chains, while deductions for non-compliant payments will be removed in a bid to crackdown on black economy operators.
An economy-wide cash payment limit for cash transactions of $10,000 plus will be introduced.
The taxable payments reporting system will be expanded to contractors in industries with higher identified risks of not reporting their income. The building and construction industry has been reporting on payments to contractors for a while now. Couriers and cleaning industries need to track these payments from 1 July 2018 for the first annual report in August 2019. In this budget, the government has extended the reporting scheme to Security & Investigation services, Road Freight Transport and Computer System Design services, who will need to start tracking these payments from 1 July 2019, with the first annual report required in August 2020.
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