Federal Budget 2019 – an Election year budget
Like so many days that follow budget night, we’re all left wondering what all the fuss was about.
The Coalition’s budget has clearly been designed to secure the government a victory at the polls next month. The budget also reveals the Coalition's key election campaign messages; big tax cuts and new roads for the regions.
This budget ensures the Morrison Government matches Labor's tax cuts while narrowing the gap on other pledges and appealing to the owners of small and medium businesses.
So what was all the fuss about?
Individual Tax cuts
Remember last year? The Government announced a huge number of changes to personal tax rates, some of which are scheduled for the 2024-25 year. Those were all legislated and ready to go.
Now, the Government wants to add some more.
Specifically:
Taxpayers earning up to $126,000 a year will see tax relief of up to $1,080 per individual, or $2,160 for dual income families.
Under the changes, the reduction in tax provided by Low and middle income tax offsets(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.
It will therefore provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less, while those with taxable incomes of $37,000 and $48,000 will see the value of the offset increase at a rate of 7.5 cents per dollar (to the maximum offset of $1,080).
For those with taxable incomes of $90,000 to $126,000, the offset will phase out at a rate of 3 cents per dollar.
These tax cuts will flow quickly and be available in our 2018-19 tax returns.
The second change will see the government lower the 32.5 per cent tax rate to 30 per cent from 1 July 2024
It will cover all taxpayers earning between $45,000 and $200,000 and will reportedly see 13.3 million taxpayers have permanently lower taxes in 2024-25
About 4.5 million Australians will receive this tax cut. This is broadly in line with what Labor has promised. So, no matter which party wins the election, there's more money coming your way at tax time.
Small Business enticements
Although we are anticipating a Federal Election fairly soon, and many, if not all, of the measures announced won’t be legislated before it, the Coalition has taken a swing at keeping small businesses on board with a range of benefits.
The big one. The Government has announced that effective from April 2, 2019 at 7.30pm, until 30 June 2020, businesses can instantly write off any asset worth up to $30,000. The threshold for accessing the write-off has now expanded from $10 million to $50 million. That’s a huge number of businesses that can now access this benefit that wouldn’t otherwise be able to, although it pays to note this is another temporary extension of the incentive.
All the rules for applying the write-off are the same. You need to have equipment purchased and installed by the end date.
The announcement will not supersede the previously announced threshold increase to $25,000, which has yet to be legislated, with businesses able to immediately deduct purchases of eligible assets costing less than $25,000 that are first-used or installed and ready for use over the period from 29 January 2019 until budget night(2 April 2019).
Businesses will also be given a $4,000 incentive to hire apprentices in industries with skills shortages like baking, bricklaying, carpentry and plumbing.
Apprentices will also get $2,000 when they hit key milestones.
ABN requirements change
From 1 July 2021, ABN holders with an income tax return obligation will be required to lodge an income tax return. Currently, ABN holders are able to retain their ABN regardless whether they are meeting their income tax return lodgment obligation or the obligation to update their ABN details.
SMSF & Superannuation tweaks
The Government will allow voluntary superannuation contributions (both concessional and non-concessional) to be made by those aged 65 and 66 without meeting the work test from 1 July 2020. People aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule.
Also, the restrictions on claiming the spouse contribution tax offset will be eased from July 2020, giving 70 to 74 year old spouses eligibility.
Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they self-report as working a minimum of 40 hours over a 30 day period in the relevant financial year. Those aged 65 and over cannot access bring-forward arrangements and those aged 70 and over cannot receive spouse contributions.
What about that surplus?
Almost, but not quite.
Some economists thought the Budget might scrape back into the black this year, but it's been written down as a $4.2 billion deficit. That's partly due to a pre-election cash splash. The Treasurer says the budget will record a healthy $7.1 billion surplus next year, but that will depend on factors outside the government's control like the global economy.
I can smell more Tax Audits
With $1 billion being handed to the ATO to extend the operation of the Tax Avoidance Taskforce, large businesses and high-net-wealth individuals can expect additional compliance activity from the Tax Office.
Along those lines, the ATO will also receive another $42.1 million to recover unpaid tax and superannuation liabilities from larger business and high-net-wealth individuals, with small businesses set to be excluded.
Prepare for road works
Queensland and Victoria are the biggest winners from a huge infrastructure spend. Nationally, the Coalition has promised a $100 billion spend over 10 years.
In Victoria, there's $6.2 billion worth of projects including $2 billion for fast rail between Melbourne and Geelong. Nationally, there's $500 million for a "commuter car park fund" that will improve access to key public transport hubs, getting more cars off our roads.
Cheaper health services
The Government will end the indexation on Medicare rebates a year earlier than planned. This matches what Labor has promised to do, if elected.
This will make it cheaper to access 119 GP services.
More hours for early education
The Morrison Government has announced it will support an extra 15 hours of preschool each week - or 600 hours per year - for children who start school in 2021.
Other notable highlights of the budget include:
A one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple currently receiving eligible Centrelink payments
Spending $606.7 million over five years (from 2018-19) to “facilitate the government’s response” to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – largely for resourcing the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority
Providing $725 million for aged care services, housing and financial support
Providing $300 billion to all schools (a total increase of 63 per cent)
Funding $9 billion in science, research and technology projects
Providing $6.3 billion in drought support and $3.3 billion for those affected by flooding
The creation of 80,000 new apprenticeships in industries with skills shortages
For more information call Cam on 0411 034 275 or email cam@nationaltaxation.com.au
Disclaimer
The information presented is general in nature and not to be used, relied or acted upon without seeking professional advice to ensure that the information appropriate for your individual circumstances. National Taxation accepts no liability for any errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. www.nationaltaxation.com.au. ABN 63 665 545 130
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