As widely anticipated, the Treasurer has announced an accelerated program of tax cuts, which can be seen as an unofficial start of the Coalition’s election campaign.
An increase to the Low and Middle Income Tax Offset will be available for most taxpayers for 2018-19, provided the Government can secure passage of the required legislation through the Parliament. Proposed major reform of income tax rates and thresholds would see most Australians facing a marginal tax rate of 30 per cent from 1 July 2024.
Some other major announcements in the 2019-20 Budget include:
- A one-off Energy Assistance Payment for recipients of income support
- An increase to the value and eligibility for the instant asset write off for small and medium sized business up to $50M turnover
- Changes to voluntary superannuation contribution rules for people aged 65 and over.
- Significant funding to implement the Government’s response to the Financial Services Royal Commission.
PERSONAL INCOME TAX
The Government will lower taxes for individuals by building on its Personal Income Tax Plan, which was announced in the 2018-19 Budget.
LOW AND MIDDLE INCOME TAX OFFSET
The Government will extend the Low and Middle Income Tax Offset (LMITO) by increasing the base amount from $200 to $255 per year and the maximum amount from $530 to $1,080 per year.
Taxpayers with income between $48,000 and $90,000 will be eligible to receive the maximum offset of $1,080. The offset phases out with incomes up to $126,000.
The new amounts will apply for the 2018-19 financial year which means, provided the Government can legislate these changes in the three Parliamentary sitting days in April, the offset will apply to tax returns lodged from 1 July 2019.The LMITO is due to end on 30 June 2022.
NEW PERSONAL TAX RATES AND THRESHOLDS
|Tax rate||From 1 July 2018||From 1 July 2022||From 1 July 2024|
|0%||$0 - $18,200||$0 - $18,200||$0 - $18,200|
|19%||$18,201 - $37,000||$18,201 - $45,000||$18,201 - $45,000|
|30%||$45,001 - $200,000|
|32.5%||$37,001 - $90,000||$45,001 - $120,000|
|37%||$90,001 - $180,000||$120,001 - $180,000||-|
|LMITO||Up to $1,080|
|LITO||Up to $445||Up to $700||Up to $700|
This round of tax cuts:
- Increases the top threshold of the 19% personal income tax bracket to $45,000 from 1 July 2022
- Reduces the 32.5% marginal tax rate to 30% from 1 July 2024-25
INCREASING MEDICARE LEVY FOR LOW-INCOME THRESHOLDS
The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from the 2018-19 income year. New thresholds will account for recent movements in the CPI.
|Single seniors and pensioners||$34,758||$35,418|
|Family seniors and pensioners||$48,385||$49,304|
|Dependent child or student||$3,406||$3,471|
International tax — list of information exchange countries to be updated
The government will update the list of countries whose residents are eligible to access a reduced withholding tax rate of 15 per cent, instead of the default rate of 30 per cent, on certain distributions from Australian managed investment trusts (MITs). To be listed, countries must have established the legal relationship enabling them to share taxpayer information with Australia. The updated list will be effective from 1 January 2020.
INSTANT ASSET TAX WRITE-OFF
The threshold for the popular $20,000 instant asset write-off will increase to $30,000* from Budget night until 30 June 2020 when it will potentially return to its original $1,000 level on 1 July 2020. We say ‘potentially’ because the threshold has been at or above $20,000 since 12 May 2015.
The Government had previously announced an increase to the threshold for the instant asset write-off to $25,000 from 29 January 2019 but this measure was not legislated prior to the release of the Budget. The Government however intends to honour the announced rate increase.
In addition, the number of businesses that can access the instant asset write-off will increase. Currently, to qualify for the write-off, only businesses with an aggregated turnover under $10 million qualify. From Budget night, businesses with an aggregated turnover under $50 million will also be able to access the write-off.
TAX INTEGRITY — INCREASING ENGAGEMENT AND ON-TIME PAYMENT OF TAX AND SUPERANNUATION LIABILITIES
The Government will provide $42.1 million over four years to the ATO to increase activities to recover unpaid tax and superannuation liabilities. These activities will focus on larger businesses and high wealth individuals to ensure on-time payment of their tax and superannuation liabilities. The measure will not extend to small businesses.
Black Economy Taskforce: strengthening the ABN rules
From 1 July 2021, Australian Business Number (ABN) holders will be stripped of their ABNs if they fail to lodge their income tax return. In addition, from 1 July 2022, ABN holders will be required to annually confirm the accuracy of their details on the Australian Business Register.
Currently, ABN holders are able to retain their ABN regardless of whether they are meeting their income tax return lodgement obligations or the obligation to update their ABN details.
Sham Contracting Unit Established
A new dedicated sham contracting unit will be created within the Fair Work Ombudsman. The unit’s role is to address sham contracting behaviour by some employers, particularly those who knowingly or recklessly misrepresent employment relationships as independent contracts to avoid statutory obligations and employment entitlement.
For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000.
Currently, primary producers and tourism operators may be eligible for a partial refund of the luxury car tax paid on eligible four wheel or all wheel drive cars, up to a maximum refund of $3,000. The eligibility criteria and types of vehicles eligible for the current partial refund will remain unchanged under the new refund arrangements.
IMPROVING FLEXIBILITY FOR OLDER AUSTRALIANS
The Government will allow voluntary superannuation contributions (both concessional and non- concessional) to be made by those aged 65 and 66 without meeting the work test from 1 July 2020.
People aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring forward rule.
Those up to and including age 74 will be able to receive spouse contributions, with those 65 and 66 no longer needing to meet the work test.
PROTECTING YOUR SUPER PACKAGE
The Government has also agreed to amendments to the Protecting Your Super Package to:
- extend to 16 months the period after which an account that has not received any contribution is considered inactive;
- expand the definition of when an account is considered active for the ATO-led consolidation regime; and
- require the ATO to consolidate to an active account, where possible, within 28 days of receipt.
ENERGY ASSISTANCE PAYMENT
The Government will provide a one-off payment of $75 for singles and $62.50 for each member of an eligible couple ($125/couple) who receive a qualifying payment on 2 April 2019 to provide relief from high energy costs. Qualifying payments include the Age Pension, Carer Payment, Disability Support Pension, Parenting Payment Single, and Veterans’ pensions and payments
ACCESS TO AGED CARE
The Government will provide $320.0 million for a one-off increase to the basic subsidy for residential aged care recipients. $35.7 million will be provided to increase to the dementia and the veterans’ home care supplements to support home care recipients who require additional care to stay in their homes longer.
The Government will provide $4.6 million to trial a residential care needs assessment funding tool as an alternative to the existing Aged Care Funding Instrument
$7.1 million will be provided over two years to improve payment administration arrangements for home care packages to align home care arrangements with other Government programs, such as the National Disability Insurance Scheme.
HOME CARE PACKAGES
The Government’s Home Care Packages Program supports Australians who choose to receive care in their own homes. The Government is providing $282.4 million over five years from 2018-19 for an additional 10,000 home care packages across all levels.
Australians with dementia or requiring cognition support will benefit from additional funding for home care supplements, and the Government is providing $7.7 million to develop an end-to-end compliance framework for home care.
COMMONWEALTH HOME SUPPORT PROGRAMME
The Government will provide $5.9 billion over two years from 2020-21 to extend the Commonwealth Home Support Programme (CHSP) funding arrangements. The CHSP contributes to essential home support services, such as meals (Meals on Wheels), personal care, nursing, domestic assistance, home maintenance, and community transport, to assist older people to keep living independently in their own home.
Please contact your adviser at WLM to discuss any items that may affect you or for further information.