On 2 April 2019, the Treasurer of Australia, Josh Frydenberg, announced the 2019-2020 Federal Budget. Highlights include personal tax reductions for low- and middle-income earners, the extension of the instant assets write-off to more businesses, superannuation and social security measures to assist older Australians, and a strengthening of the ABN rules.
Here are some of the highlights, explained as a simplified summary. It’s important to bear in mind, however, that this Budget was announced prior to the announcement of a Federal election, the results of which may affect changes intended by the incumbent Government.
The Government announced it will provide a further reduction in tax through the non-refundable low- and middle-income tax offset (LMITO).
Under the changes, the reduction in tax provided by the LMITO will increase from a maximum amount of $530 to $1,080 per annum and the base amount will increase from $200 to $255 per annum for the 2018-19, 2019-20, 2020-21- and 2021-22-income years.
- From 1 July 2022, the Government proposes to increase the top threshold of the 19% personal income tax bracket from $41,000, as currently legislated, to $45,000
- From 2024-25, the Government said it would reduce the 32.5% marginal tax rate to 30%
Therefore, with the Government’s announced changes, from 2024-25, there would only be three personal income rates: 19%, 30% and 45%. From 1 July 2024, taxpayers earning between $45,000 and $200,000 will face a marginal tax of 30%.
Concessional FHA treatment for income from forced disposal of livestock
From 1 July 2018, farmers receiving Farm Household Allowance (FHA) will be able to discount or exempt income from the forced sale of livestock from the FHA income test when that income is invested in a farm management deposit.
This measure will assist FHA recipients who are destocking in retaining access to income support while still being able to make long-term financial plans.
The instant asset write-off will be extended to include more businesses and increased to include business assets costing below $30,000 (up from $25,000).
There are two key changes:
- Small business entities (for example those with an aggregated annual turnover of less than 10 million) will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from Budget night (ie 2 April 2019) to 30 June 2020
- Medium sized businesses (for example those with an aggregated annual turnover of $10 million or more, but less than $50 million) 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 Budget night to 30 June 2020
Read more about the instant asset write-off scheme here.
Proposed Division 7A amendments
The Government announced that it will defer the start date of the 2018-19 Budget measure, Tax Integrity clarifying the operation of the Division 7A integrity rule, from 1 July 2019 to 1 July 2020.
Voluntary superannuation contributions
The budget confirmed the Treasurer’s announcement on 1 April 2019 that individuals aged 65 and 66 will be able to make voluntary superannuation contributions from 1 July 2020 (both concessional and non-concessional) without needing to meet the contributions work test.
Spouse contributions age limit increase
The age limit for making spouse contributions will be increased from 69 to 74. Currently, those aged 70 and over cannot receive contributions made by another person on their behalf.
Exempt current pension income calculation to be simplified for super funds
Superannuation fund trustees with interests in both the accumulation and retirement phases during an income year will be allowed to choose their preferred method of calculating exempt current pension income (ECPI).
The Government will also remove a redundant requirement for superannuation funds to obtain an actuarial certificate when calculating ECPI using the proportionate methods, where all members of the fund are fully in the retirement phase for all the income year.
Tax relief for merging superannuation funds to be made permanent
The current tax relief for merging superannuation funds that is due to expire on 1 July 2020, will be made permanent from that time.
Increased LCT refunds for farmers and tourism operators
The Government announced that it will provide further relief to farmers and tourism operators by amending the luxury car tax (LCT) refund arrangements. For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car purchased, up to a maximum of $10,000.
Social security measures
One-off tax-free energy payment to pensioners
The Budget confirmed the Treasurer’s announcement on 31 March 2019 that more than 3.9 million Australians will receive a one-off Energy Assistance Payment to help with their next energy bill cost of living expenses.
The payment of $75 for singles and $125 for eligible couples ($62.50 for each member), who were eligible for qualifying payments on 2 April 2019 and are Australian residents, will be exempt from income tax and will be paid automatically before the end of the current financial year, subject to the passage of legislation [Labor has indicated it would likely support such measures].
The payment will be made to:
- 4 million Australians receiving the Age Pension
- 744,000 receipts of the Disability Support Pension
- 280,000 carers receiving the Carer Payment
- 242,000 Parenting Payment Single recipients
- 225,000 veterans and their dependents receiving eligible payments from the Department of Veterans’ Affairs
Black Economy Taskforce to strengthen the ABN rules
- The Government will strengthen the Australian Business Number (ABN) system by imposing new compliance obligations for ABN holders to retain their ABN.
- Currently, ABN holders are able to retain their ABN regardless of whether they are meeting their income tax return lodgement obligation or the obligation to update their ABN details.
- Accordingly, from 1 July 2021, ABN holders with an income tax return obligation will be required to lodge their income tax return, and from 1 July 2022 confirm the accuracy of their details on the Australian Business Register annually.
These measures will commence 1 July 2019 unless the 2019 Federal election results in changes being made to the legislation.
If you’d like to know more about the Federal Budget changes announced on 2 April 2019, call Geoff Morris at Billings and Ellis today.