It’s that time of year again when the Federal Budget is handed down. These are a few things that we took from the 2018/19 Federal Budget and what they mean for you.
- Level playing field for small business
- Instant Asset Write-off extended
- Income Tax relief
- Green light on Child Care subsidy
- Super superannuation changes
Level playing field for small businesses
Small businesses that play by the rules may have just had the playing field levelled. For many years small businesses have complained about losing contracts to competitors. Competitors who have lower costs and don’t do the right thing in regard to wages, contractors and tax payments.
From 1 July 2019 the Government are looking to target tax evasion and under-payment of wages in several ways that may help small business.
- The ATO will be denying a tax deduction to businesses that withhold payments from employees and contractors and do not forward those amounts to the ATO. This includes where the employer fails to report amounts withheld to the ATO. Meaning businesses that fail to withhold tax correctly, report it and pay it to the ATO will find the entire payment no longer tax-deductible.
- Reporting amounts paid to contractors to the ATO in the form of Taxable Payments Annual Report will be extended. This is currently required for businesses in building and construction. In future, TPAR will also cover security, road freight transport and computer system design industries. This measure is designed to bring contractor payments within these industries in line with payments to employees generally. Making both the contractor and the ATO aware of the exact amount paid from each business to its contractors.
- Businesses will no longer be allowed to receive cash payments of greater than $10,000 for any goods or services provided. Non-business transactions, and transactions with banks remain unchanged.
- Reform in corporations and tax laws to deter illegal phoenix activity. Some of these measures will limit circumstances in which directors can resign if a company is left with no directors. Also extending the Director Penalty Regime to include GST, luxury car tax and wine equalisation tax, making directors personally liable for the company’s debts.
Overall, it is hoped these measures will reduce the ability of businesses to underpay staff, avoid reporting of payments for contractors and ensure directors are accountable for their actions.
Instant asset write-off extended
There will be continued relief for small businesses as the $20,000 instant asset write-off is extended for another year to 30 June 2019. First introduced on budget night 2015/16, this tax concession was originally set to end on 30 June 2017. The last Federal Budget announced a 12 month extension and it has been extended yet again for another 12 months.
The benefits to business considered small, under current legislation, relate to tax-deductibility of assets used in the business. Therefore it varies based on each small business’ structure and profitability.
If a business then purchases an asset up to the value of $20,000 it may claim a full tax deduction in the current financial year. Rather than depreciating the asset over several years. The $20,000 limit applies per asset, rather than per business or per year. This means businesses may claim several assets provided each individual asset cost less than $20,000 to purchase, including installation.
The write off provides a great tax benefit to those businesses considering purchasing assets, by bringing forward deductions. However, business with carried forward losses or that made a loss over the current financial year, the benefits may not be so great.
Income Tax Relief
Tuesday night’s Federal Budget delivered reductions in personal tax that will be phased in over the next seven years.
From 1 July 2018 to 30 June 2022, the Government will introduce a new non-refundable Low and Middle Income Tax Offset (LMITO). Designed to provide tax relief of up to $530 for taxpayers earning up to $90,000 and will be in addition to the existing Low Income Tax Offset (LITO). The offset phases out from $90,001 to $125,333.
The Government has decided not to increase the Medicare Levy and it will remain at 2%.
|Rate||2018/19 – 2021/22||2022/23 – 2023/24||2024/25 – onwards|
|LITO||Up to $445||Up to $645||Up to $645|
|LMITO||Up to $530|
Tax rates and thresholds (not including 2% Medicare Levy)
Green light on Child Care Subsidy
In last year’s Federal Budget we reported on the planned new Child Care Subsidy (CCS) which will replace the two current child care payments. The Government have confirmed that this will go ahead from 2 July 2018.
So this is an important reminder to make sure you register before this date.
The family income caps:
|Family Income||Your CCS Percentage %|
|$66,599-$171,958||Percentage reduces by 1% for eery $3,000 of family income|
|$251,249-$341,248||Percentage reduces by 1% for every $3,000 of family income|
Your CCS percentage by family income
Mature aged individuals in the workforce
To assist pensioners in working part-time or to be self-employed and not jeopardising their fortnightly pension, the work pension bonus will increase. Going from $250 to $300 a fortnight and allowing those individuals to earn up to $7,800 per year. This is an additional $1,300 per year on top of the current allowance.
The government will provide wage subsidies of up to $10,000 for employers who take on employees aged over 50. With further incentives provided to up-skill mature aged workers.
Super superannuation changes
Superannuation funds will have all exit fees banned from 1 July 2019.
There will be a fee cap of 3% on charges by a superannuation fund to protect super balances below $6,000. This threshold will also apply to superannuation accounts deemed inactive, these are funds that have not received a contribution in 13 months. Additionally, inactive accounts will need to be transferred to the ATO.
There will be an opt-in for life and TPD insurance for those under 25 with a balance of less than $6,000.
Currently, those aged 65-74 who want to contribute to superannuation have to meet the work’s test. This means working 40 hours in a consecutive 30 day period. Coming in from the 1 July 2019, there will be a one year exemption on the work’s test. Only if the customer’s balance is below $300,000 and the work test was satisfied in the previous year. For example, if Mary aged 66, stops working in 2018/19 and her balance is below $300,000. Mary would be able to contribute to superannuation in 2019/20 without meeting the work’s test.
Self-managed super funds were not left out of this year’s Federal Budget. Currently the maximum number of members an SMSF can have is four. There is a proposal to increase this to a maximum of 6 members. Additionally, there is also a proposal to increase the time between audits to three years. This is only for funds with good record-keeping, a clear audit history for three consecutive years and that lodge their annual returns on time.
That’s the Canny Group wrap from the 2018/19 Federal Budget. Let us know if you have any questions.