INFORMATION ABOUT THE 2018/2019 FEDERAL BUDGET.
The Federal Government handed down the 2018-2019 Budget on 8 May 2018.
It is important to remember that these announcements are only proposals at this stage. Each proposal will need to pass through both the House of Representatives and the Senate before they become law. This process may take weeks or even months, and some of the below proposals may be rejected in part or whole.
Proposed budget changes from 1st July 2018
- A low and middle income tax offset (LMITO) will be introduced as a non-refundable tax offset of up to $530 per annum. This offset will be available (partially or fully) for individuals with personal taxable income between $18,200 and $125,000. This offset in in addition to the existing low income tax offset (LITO).
- The upper threshold of the 32.5% tax bracket, currently $87,000, will be increased to $90,000.
- Small increases to the Medicare levy low-income thresholds will commence.
- The ATO will be provided with $130.8 million to increase compliance activities targeting individual taxpayers.
- The current $20,000 instant asset write-off threshold will be extended for small business entities (SBEs) until 30 June 2019. This measure was originally set to expire on 30 June 2018.
- Individuals with personal taxable income in excess of $263,157 per year and have multiple employers, will be able to nominate that their wages from certain employers are not subject to the 9.5% compulsory superannuation guarantee. This is to avoid breaches of the $25,000 annual concessional contribution limit.
Proposed budget changes from 1st July 2019
- Amendments to Division 7A legislation will commence, in particular relating to unpaid present entitlements owing from related trusts.
- Tax deductions previously available for expenses associated with holding vacant land will be disallowed. There will however be limited situations where these deductions may still be available.
- Payments to employees and contractors will lose their deductibility if the payer fails to meet their responsibility in withholding amounts from the payments.
- The concessional tax rates available for minors receiving income from a testamentary trust 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. This will close a loop hole that involves injecting assets unrelated to the deceased estate into a testamentary trust and obtaining concessional tax treatment of the income.
- The maximum number of allowable members in a self-managed super fund will be increased from four to six.
- The annual audit requirements for self-managed super funds will be changed from yearly to three-yearly for funds with a good compliance and audit history.
- An exemption from the work test for voluntary contributions to superannuation for people aged between 65-74 with superannuation balances below $300,000 in the first year that they do not meet the work test requirements.
- The taxable payments reporting system for payments to subcontractors will be expanded to include the security services, road freight transport and computer system design industries.
- Introduction of new corporation and tax laws to deter illegal phoenix activity, including preventing directors improperly backdating resignations to avoid liability, extending the Director Penalty Regime to include GST, luxury car tax, wine equalisation tax, making directors personally liable for these debts and limiting the ability of directors to resign when this would leave the company with no directors.
- Businesses can no longer receive cash payments above $10,000 for goods and services provided.
- Offshore sellers of hotel accommodation in Australia will be required to calculate their GST turnover in the same way as local sellers of these services.
Additionally, it has been announced that the Medicare levy will remain unchanged at 2% for the foreseeable future. The previous proposal to increase the Medicare levy to 2.5% will no longer proceed.
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