2018/19 Federal Budget Highlights
Individuals
A seven-year personal income tax plan will be implemented by the government in three steps to introduce a low and middle income tax offset, to provide relief from bracket creep and remove the 37% personal income tax bracket.
On completion, this would bring 94% of Australian taxpayers to a rate of 32.5% or less compared with 63% of taxpayers at current levels.
The Treasurer announced an immediate tax relief for low and middle income earners equivalent to around $540 per year.
Medicare Levy
The government is not proceeding with the increase to the Medicare Levy from 2% to 2.5% which was announced in the 2017/18 Federal Budget.
The Medicare Levy low income thresholds for singles, families, seniors and pensioners will be increased from the 2017/18 income year.
Income Tax Rates and Thresholds for 2018/19 Onwards
The table below summarises the announced personal tax rate and threshold changes (excluding the 2% Medicare Levy).
| Rate | 2018/19 to 2021/22 | 2022/23 and 2023/24 | 2024/25 onwards |
| 0% | $0 – $18,200 | $0 – $18,200 | $0 – $18,200 |
| 19% | $18,201 – $37,000 | $18,201 – $41,000 | $18,201 – $41,000 |
| 32.5% | $37,001 – $90,000 | $41,001 – $120,000 | $41,001 – $200,000 |
| 37% | $90,001 – $180,000 | $120,001 – $180,000 | N/A |
| 45% | $180,001 + | $180,001 + | $200,001 + |
| LITO | Up to $445 | Up to $645 | Up to $645 |
| LMITO | Up to $530 |
Medicare Levy to remain at 2%
LITO – Low Income Tax Offset
LIMTO – Low and Middle Income Tax Offset
Asset Acquisition
The $20,000 instant asset write off will be extended for small businesses with aggregated turnover of less than $10M by another year to 30 June 2019. The assets acquired must be installed and ready for use before 30th June 2019.
The current rules regarding accelerated depreciation for small businesses remain in place. These pooled assets can be depreciated at the initial rate of 15% in the first year.
Business Operations
- Non-compliant payments to employees and contractors are no longer deductible.
Businesses will no longer be able to claim deductions or payments to their employees, where they have not met their PAYG obligations.
Businesses will be denied deductions on certain payments to contractors which have not met PAYG obligations.
The current system is that, if a contractor does not quote an ABN in a “business to business” transaction, the purchaser is required to withhold an amount at the top marginal tax rate and remit this amount to the Australian Taxation Office.
The changes foreshadowed by the Treasurer will mean that failure to do this correctly will render the entire payment non-deductible.
These changes will take effect from 1st July 2019.
- Taxable payments reporting system to be expanded.
The Taxable Payments Reporting System will be expanded from the 1st July 2019, by inclusion of the following industries:
- security providers and investigation services
- road freight transport
- computer system design and related systems
The first reports for these industries will be required to be submitted during August 2020.
- Large government contract tenderers required to be tax compliant
The Treasurer announced that businesses seeking to tender for contracts valued at over $4M (including GST), with the Australian government will be required to provide information on the status of their tax obligations.
- Limit to the amount of cash that a business can receive
The government proposes to introduce a limit to the amount of cash that a business can receive to under $10,000 from 1st July 2019.
This proposal will not affect transactions with financial institutions or consumer to consumer non-business transactions.
GST
- Offshore hotel accommodation sellers.
The Treasurer announced that GST will be extended to offshore sellers of hotel accommodation in Australia from 1st July 2019. This change will require these types of businesses to calculate the GST amounts in the same manner that is utilised by other businesses in Australia.
Anti-Phoenixing
The government will amend the required laws to provide regulators with additional tools to assist them to deter illegal phoenix activity.
The reforms will include:
- prevent directors improperly backdating resignations to avoid liability or prosecution;
- limit the ability of directors to resign when this would leave the company with no directors;
- restrict the ability of related creditors to vote on the appointment, removal or replacement of an external administrator;
- extend the director penalty regime to GST, Luxury Car Tax and Wine Equalisation Tax, making directors personally liable for the company’s debts; and
- expand the Australian Taxation Office’s power to retain refunds where there are outstanding tax lodgements.
Trusts
- Anti-avoidance rules for circular trust distributions extended to family trusts
A specific anti-avoidance rule that applies to closely held trusts engaging in circular trust distributions will be extended to family trusts.
- Testamentary trusts and injected assets
From 1st July 2019, the concessional tax rates available for minors receiving income from testamentary trusts will be limited to income derived from assets that are transferred from the deceased estate, or the proceeds of the disposal or investment of those assets.
Skills
- Skilling Australians fund
The government will allocate $250M to the Skilling Australians Fund to support vocational education and training to Australian workers.
If you would like to discuss any of the items included in the Australian government’s 2018/19 Budget, please do not hesitate to contact us.
Please note: The government must submit its budget to the House of Representatives and the Senate for debate and passing of the legislation before most of the items become law, therefore some of the items discussed have not yet been legislated by Federal Parliament.
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