Late last night, Scott Morrison (Federal Treasurer), unveiled his highly anticipated Federal Budget for 2018/19. The Budget emphasises on personal tax cuts, investments in road and railway infrastructure, and measures to responsibly repair the budget deficit. Additionally, the Budget addresses changes to Superannuation, business taxation and methods to tackle the Black Economy.
- A three-step, seven-year plan will be implemented to introduce a low and middle income tax (LMITO) offset to provide relief from bracket creep and to remove the 37% personal income tax bracket.
- The LMITO will be introduced as a non-refundable tax offset of up to $530 to resident low and middle income taxpayers from 2018/19 to 2021/22.
- The Medicare Levy low-income threshold will increase for the 2017/18 income year for singles, families, seniors and pensioners.
- The increase in the Medicare Levy from 2% to 2.5% of taxable income as proposed in the 2017/18 Budget will not be implemented.
- No changes to rules around work-related deductions.
BUSINESS INCOME TAX
- Major changes to the R&D tax incentive will commence for income years starting 1 July 2018. A maximum cash refund will apply for some entities.
- The $20,000 instant (capital) asset write-off deduction for small businesses will be extended by another year to 30 June 2019.
- Amendments to Div 7A will reinforce the unpaid present entitlements (UPE) rules from 1 July 2019. This date is also the start date of targeted amendments to Div 7A.
- Deductions will be denied for expenses associated with holding vacant land not genuinely used to earn assessable income.
- From 1 July 2019, payments to employees and contractors are no longer deductible where the amounts paid did not have PAYG withheld, despite the PAYG withholding requirements applying to these payments.
- Tax exempt entities that become taxable after 8 May 2018 will not be able to claim tax deductions that arise on the repayment of the principal of a concessional loan.
- The 50% capital gains discount for managed investment trusts (MITs) and attribution MITs (AMITs) will be removed at the trust level.
- The concessional tax rates for the income of minors from testamentary trusts will not be available for trust assets unrelated to the deceased estate.
- The maximum number of allowable members in SMSFs and small APRA funds will be increased to six members from 1 July 2019.
- The annual audit requirement for SMSFs with a history of good compliance will be changed to a three yearly requirement.
- Individuals who have multiple employers and whose income exceeds $263,157 will be able to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG) from 1 July 2018.
- Effective from 1 July 2018, individuals must confirm in their income tax returns that they have complied with the “notice of intent” requirements in relation to their personal superannuation contributions.
- For people aged 65-74 with superannuation balances below $300,000, an exemption from the work test for voluntary contributions to superannuation will apply for the first year that they do not meet the work test requirements. This will be introduced from 1 July 2019.
- Insurance arrangements for certain superannuation members (e.g. young people and low-income earners) will be changed from being a default framework to being offered on an opt-in basis.
- Passive fees charged by superannuation funds on accounts with balances below $6,000 will be capped at 3% annually, and exit fees on all superannuation accounts will be banned.
TACKLING THE BLACK ECONOMY
- A package will be introduced to reform the corporations and tax laws to deter and disrupt illegal phoenix activity and black economy activity.
- The taxable payments reporting system for payments made to contractors will expand to include road freight transport, security services, and computer system design industries, effective from 1 July 2019.
- From 1 July 2019, business seeking to tender for Australian government contracts above $4 million (including GST) will need to provide a statement of compliance with their tax obligations.
- From 1 July 2019, businesses can no longer receive cash payments for goods and services above $10,000.
- The luxury car tax on cars re-imported into Australia following a refurbishment overseas, will be removed from 1 January 2019.
- Measures will be introduced to combat illicit tobacco in Australia, including collecting tobacco duties and taxes upon importation.
- Customs tariffs will be removed from placebos and clinical trial kits that are imported into Australia, effective from 1 July 2018.
- Access to refunds of indirect taxes, including GST, fuel and alcohol taxes under the Indirect Tax Concession Scheme has been extended.
- There are no changes to negative gearing, dividend imputation/franking and GST.