Tuesday’s Federal Budget 2018 is Scott Morrison’s third budget and the last before the next federal election. With that in mind…. this most recent budget has been developed.
So, what does this mean for you? Well, there are some goodies headed your way thanks to Australia’s record-breaking run of economic growth and some new revenue measures.
Here’s a quick guide to what’s in store, broken down into three bite-sized sections: Individuals, Business & Superannuation.
A guide to the Federal Budget 2018
Proposed Low and Middle Income Tax Offset
From the 1 July 2018, a non-refundable tax offset of up to $530 per annum will be made available to Australian resident low and middle-income taxpayers. The offset will also be available for 2020, 2021 and 2022 financial years. The benefit is as follows;
- Taxpayers with taxable incomes of $37,000 or less will receive a benefit of up to $200;
- For taxpayers with taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of three cents per dollar to the maximum benefit of $530;
- For taxpayers with taxable incomes from $48,000 to $90,000 a $530 offset applies; and
- For taxpayers with taxable incomes from $90,001 to $125,333, the offset will phase out at a rate of 1.5 cents per dollar.
Proposed changes to the personal income tax rates
From 1 July 2018, the Government will increase the top threshold of the 32.5% personal income tax bracket from $87,000 to $90,000. The rates below do not include the Medicare Levy
Proposed changes to Vacant Land deductions
From 1 July 2019, for expenses associated with holding vacant residential or commercial land, including interest incurred to finance the acquisition of the land. Deductions for expenses associated with holding the land will be available once a property has been constructed on the land, it has received approval to be occupied and is available for rent. Denied deductions can be included in the cost base of the land (but only if the expense qualifies as an element of cost base under the usual rules).
Proposed changes for Businesses
1. The Government will extend the $20,000 immediate write-off for small business by a further 12-months to 30 June 2019 for businesses with aggregated annual turnover less than $10 million.
2. From 1 July 2019, businesses will no longer be able to claim a deduction for;
- Payments to their employees such as wages where they have not withheld any amount of PAYG from these payments (i.e., despite the fact the PAYG withholding requirements apply).
- Payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (despite the withholding requirements applying).
3. The Government has announced it will further expand the contractor payment reporting system to the following industries where business are required to report payments to contractors to the ATO.
From 1 July 2018
- Courier Services
From 1 July 2019
- security providers and investigation services;
- road freight transport; and
- computer system design and related services.
4. From 1 July 2019, the Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services. This measure will require transactions over a threshold to be made through an electronic payment system or cheque. Transactions with financial institutions or consumer to consumer non-business transactions will not be affected.
Proposed changes to work test for voluntary contributions
1. From 1 July 2019, the Government will introduce an exemption from the work test for voluntary contributions to superannuation, for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements. Under current law, the work test restricts the ability to make voluntary superannuation contributions for those aged 65-74 to individuals who self-report as working a minimum of 40 hours in any 30 day period in the financial year. The work test exemption will give recent retirees additional flexibility to get their financial affairs in order in the transition to retirement.
Proposed changes to the maximum number of allowable members in SMSF
2. From 1 July 2019, the Government will increase the maximum number of allowable members in new and existing SMSFS and small APRA funds from four to six. This will provide greater flexibility for joint management of retirement savings, in particular for large families.