The 2019 Federal Budget is indeed a pre-election budget geared at winning back the hearts of middle Australia, small business and status quo for pensioners. And no talk of Franking credit refunds being denied or negative gearing changes. Indeed, the winners are Individuals earning up to $126,000 pa and Businesses with annual turnover up to $50 million.
For those in the top 10% of Australians, the Government suggests these taxpayers are intended to bear a slightly greater proportion of the burden under the Government Budget proposal.
Our brief summary follows:
Division 7A: Feared Div7A changes have been deferred from 1 July 2019 to 1 July 2020. However, there is no talk of changes to the proposed model. The business sector has an extra year to prepare for any changes to Distributable Surplus, quarantined Division 7A loans and UPEs.
Small Business Write-off: There will be an immediate increase the instant asset write-off to $30,000 for assets acquired after 7.30pm on 2 April 2019 for businesses less than $10m turnover. Businesses with a turnover of $10m or more, but less than $50m will also be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from after 7.30pm on 2 April 2019 to 30 June 2020.
Small and medium business tax cuts: It is proposed that the Govt. will reduce the company tax rate to 25% from 2021-22.
Farmers: Farmers receiving Farm Household Allowance (FHA) will be able to discount/exempt income from the forced sale of livestock from the FHA income test when utilising a farm management deposit.
Floods: Govt. will provide an income tax exemption for qualifying grants made to primary producers and small businesses affected by the North Queensland floods.
Debt Collection: Govt. to provide $42m to the ATO to increase its capacity to recover unpaid tax and superannuation liabilities.
GST and Indirect Taxes
No changes in the 2019-2020 budget measures.
EMDG: Govt. to invest $60m in the export market development grants (EMDG) scheme over the next 3 years to help more businesses export their products and services around the world.
Apprentices: Govt. is aiming to add 80,000 new apprenticeships over 5 years in industries with skills shortages. The Govt. intends to double the incentive payments to employers to $8,000 per placement and new apprentices will also receive a $2,000 incentive payment.
R&D Measures: Although Govt. R&D Tax Incentive measures from 1 July 2018 have been put on hold, the Government has significantly revised down the expected cost of the programme over the forward estimates highlighting a further tightening of the R&D incentive measures.
Financial Sector: Govt. announced increases to the financial sector’s key regulators, ASIC ($400m) and APRA ($150m), as well as an expansion of the Federal Court to prosecute white collar crime to help drive accountability in the financial sector.
Auditing Standards: Govt. is providing $0.8m to the Auditing and Assurance Standards Board with a view of improving audit quality in Australia.
Govt. will make several minor amendments to the hybrid mismatch rules in Div. 832 to prevent multinational corporations from exploiting differences in the tax treatment of an entity or instrument under the laws of two or more tax jurisdictions.
Govt. is providing $1bn over 4 years to the ATO to extend the operation of the Tax Avoidance Taskforce and to expand the Taskforce’s programs. This measure covers compliance activities targeting multinationals, large public and private groups, trusts and high wealth individuals. This measure is intended to allow the Taskforce to expand these activities, including increasing its scrutiny of specialist tax advisors and intermediaries that promote tax avoidance.
The Govt. is offering a non-refundable low and middle income tax offset (LMITO). The changes are as follows:
- A reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less.
- Taxable incomes between $37,000 and $48,000, the value of the offset will increase 7.5 cents per dollar to a maximum offset of $1,080.
- Taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1,080.
- Taxable incomes between $90,000 to $126,000 the offset will phase out at a rate of 3 cents per dollar.
Further tax cuts do not kick in 2022-2023.
Minor increases to the Medicare threshold: threshold for singles will be increased to $22,398; family income threshold will be increased to $37,794.
Spouse Contributions: The age limit for spouse contributions to be increased to 74 years of age to give older Australians greater flexibility to both contribute and save for retirement.
Already Announced: From 1 July 2020, voluntary superannuation contributions (both concessional and non-concessional) will be able to be made by those aged 65 and 66 without the need to meet the work test.
Superannuation Pensions: SMSF with both accumulation and retirement pensions will be allowed to choose their preferred method of calculating exempt current pension income. The Govt. intends to remove a redundant requirement for superannuation funds to obtain an actuarial certificate when using the proportionate method, where all members of the fund are in retirement mode for that relevant income year.
Consumer Advocate: Govt. to undertake an expression of interest to identify options to establish a Superannuation Consumer Advocate. The Advocate would provide input on behalf of consumers in policy discussions and provide information and education programs to assist consumers with better understanding the superannuation system.
In total the Govt. proposes to provide $1b over 4 years to the Australian Taxation Office to extend the operation of the Tax Avoidance Taskforce and to expand the Taskforce’s programs and market coverage.
ABN System: Govt. proposes changes to the Australian Business Number (ABN) system by imposing new compliance obligations for ABN holders to retain their ABN. From 1 July 2021, ABN holders with an income tax return obligation will be required to lodge their income tax return and confirm their income details on the Australian Business Register annually.
ATO Analytics: Govt. proposes additional funding measures designed to increase the ATO’s analytical capabilities.
Sham Contractors: Govt. is to provide $9.2m to establish a dedicated sham contracting unit within the Fair Work Ombudsman. This intends to address those who knowingly or recklessly misrepresent employment relationships as independent contracts in order to avoid statutory obligations and employment entitlements.
Money Laundering: Govt. injection of $28.4m to the Australian Transaction Reports and Analysis Centre (AUSTRAC) to expand Fintel public/private partnership to ensure resilience in the financial system and disrupt money laundering, terrorism financing and other criminal activities.
Govt. announces a $100bn in infrastructure spending over ten years. It proposes therein a quadrupling of the Urban Congestion Fund, including $500m on a commuter car park fund.
The Federal Governments’ Budget war-cry for 2019-2020 – Back in the Black.
Date of Issue: 3 April 2019
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