I believe this is the Clayton’s Budget. It’s the budget you have when you are not getting a budget.
By this, I mean (well, I believe) that the ALP will win the 2019 federal election next month and so it will be their tax agenda that will come to the fore.
Hence, much of what you are about to read will not become law.
But let’s wait and see…
The Coalition have offered tax changes that are very good for small businesses.
Firstly, they are going to reduce income tax rates for individuals as per the table below – excellent news. In addition, they’ve announced increases in Medicare levy thresholds. These are also set out below.
Building on the Personal Income Tax Plan
- The Government has announced that it will introduce amendments to build on its legislated seven-year Personal Income Tax Plan.
- The proposed changes consist of:
- amendments to the low and middle income tax offset (LMITO) , which will increase the amount of the relief available to eligible individuals in the 2018–19 to 2021–22 income years;
- an increase in the top threshold of the 19 per cent tax rate from $41,000 to $45,000 from 1 July 2022;
- an increase in the low income tax offset from $645 to $700 from 1 July 2022; and
- a reduction of the 32.5 per cent marginal tax rate to 30 per cent from 1 July 2024.
Increasing the Medicare levy low-income thresholds
- The Government has announced it will increase the Medicare levy low-income threshold from the 2018–19 income year for:
- singles — from $21,980 to $22,398;
- families — from $37,089 to $37,794;
- single seniors and pensioners — from $34,758 to $35,418;
- seniors and pensioners — families — from $48,385 to $49,304; and
- each dependent child-student — from $3,406 to $3,471.
- The increase adjusts the thresholds to take into account increases in the CPI.
Increasing and expanding access to the instant asset write-off
The proposed reduction in the instant asset write off amount is a ripper – super dooper good for small business cash flow. The key points are below, with the increase to a $30,000 upper threshold being the main point.
- The Government has announced that it will:
- increase the instant asset write-off threshold from $25,000 to $30,000; and
- expand the instant asset write-off to make it available to medium-sized businesses (aggregated annual turnover of $10 million or more, but less than $50 million), in addition to small business entities (SBEs).
- Assets eligible for the immediate write off assets must cost less than $30,000 and be:
- for SBEs — first used, or installed ready for use, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020;
- for medium sized businesses — acquired and first used, or installed ready for use, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020.
- The Government will still proceed with its previously announced measure to allow SBEs an instant asset write-off for eligible assets costing less than $25,000 (increased from the current threshold of $20,000) that are first used or installed ready for use from 29 January 2019 until 7.30pm (AEDT) on 2 April 2019.
Summary of relevant dates for instant asset write-off
|Dates first used, or installed ready for us||Instant asset write-off threshold||Eligible taxpayers|
|From 7.30pm (AEST) on 12 May 2015 to 28 January 2019||$20,000||Small business entities (originally aggregated turnover less than $2 million but this was increased to less than $10 million from 1 July 2016)|
|From 29 January 2019 until 7.30pm (AEST) on 2 April 2019||$25,000||Small business entities (aggregated turnover less than $10 million)|
|From 7.30pm (AEST) on 2 April 2019 to 30 June 2020||$30,000||All business with an aggregated turnover less than $50 million|
|From 1 July 2020||$1,000||Small business entities (aggregated turnover less than $10 million)|
Superannuation – Improving flexibility for older Australians
This is a nice little kicker for our older clients. It’s another admittance that older people want to keep working and are extremely valuable to small business.
- The Government has announced that, from 1 July 2020, it will allow voluntary superannuation contributions to be made by individuals aged 65 and 66 without having to meet the work test.
- Individuals aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule.
- Individuals up to and including age 74 will be able to receive spouse contributions.
Personal Services Income
The ATO continue to badger the government on Personal Services Income and dodgy employers trying to escape superannuation obligations for their employees.
In my opinion, it’s fantastic to see the government continuing to crack down in this area. Your people are your number one asset, so looking after them is paramount.
It’s a shame the government has to put more money into trying to penalise these dodgy employers trying to diddle their staff.
- The Government has announced that it will establish a sham contracting unit — within the Fair Work Ombudsman — to address sham contracting behaviour engaged in by some employers.
- The new unit will focus on employers who knowingly or recklessly misrepresent employment relationships as independent contracts to avoid statutory obligations and employment entitlements.
Single Touch Payroll expansion
The strength of the IT revolution from the Aussie government is in their data matching, and STP is going to give them a brilliant opportunity to do far more extensive data matching. Below is some commentary on what they intend to do – it’s good news for hard working citizens.
- The Government has announced that it will automate reporting of employment income for social security purposes through STP.
- STP data sharing arrangements with the Department of Human Services will reduce risks of overpayment of income support benefits for recipients with employers using STP.
- More funding will be provided to the ATO and the Department of Veterans’ Affairs to enable greater use of data collected through STP to be shared with Commonwealth Agencies.
Reduction to company tax
- The Government has legislated lower tax rates for small and medium-sized companies with turnovers below $50 million.
- Small and medium‑sized companies currently facing a 27.5 per cent rate will have a 25 per cent rate by 2021-22, which is five years earlier than previously planned. This compares to the standard company tax rate of 30 per cent.
Source: Federal Budget 2019-20