Hot off the press is our analysis of the federal budget, announced on 8 May 2018. We’ve detailed how you can maximise the federal budget for your benefit.
With 2018 being an election year, the Federal Budget was bound to have more winners than losers and the government did not disappoint. Reading the federal budget summary feels a little bit like being on the Oprah show with the gifts that were given away. Though perhaps not as good as the cars that were given away to audience members!
We’ve detailed how you can maximise the budget for your benefit in the following areas:
1. Personal Income Tax Plan
2. Business Changes
3. Superannuation Changes
1. Personal Income Tax Plan
This is a seven-year plan and includes many levels of personal tax:
- Income Tax Bracket Changes
From 1st July 2018 there is the change in the tax brackets of the sliding scale which will lead to a saving in tax for all levels.
- Low and Middle-Income Tax Offset
A new non-refundable Low and Middle-Income Tax Offset (LMITO) will be introduced. The LMITO will be a temporary measure applying from 2018-19 and phasing out in the 2021-22 financial year. For example, if you are earning $37,000 and you have paid tax you will receive an extra $200 as a refund.
- Low Income Tax Offset
From 1 July 2022 the annual Low-Income Tax Offset (LITO) will increase to $645 and will cut out for those with a taxable income above $66,667 per annum.
- Medicare Levy Increase
The additional 0.5% increase to the Medicare Levy last year (increasing to 2%) will continue however the Government has confirmed that they will not proceed with the increase to 2.5% from 1 July 2019.
2. Business Changes
- $20,000 instant asset write-off
The $20,000 instant asset write off has been extended to 30th June 2019 for small businesses.
Assets values at $20,000 or more can continue to be depreciated in the small business pools with a deduction of 15% the first year and 30% each income year after.
- Removal of tax deductibility of certain wages and contractor payments
From 1 July 2019, businesses will no longer be able to claim a deduction for the following payments:
• Payment to their employees such as wages where they have not withheld any amount of PAYG from these payments (i.e. despite the fact that PAYG Withholding requirements apply).
• Payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (despite the withholding requirements applying).
- Economy-wide cash payment limit
From 1 July 2019, the Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services. Currently, large undocumented cash payments can be used to avoid tax or to launder money for criminal activity. This measure will require transactions over a threshold to be made through an electronic payment system or cheque. Transactions with financial institutions or consumer to consumer non-business transactions will not be affected.
- Expanding the contractor payment reporting system
The contractor payment reporting system will be expanded to include the following industries:
• Security providers and investigation services,
• Road freight transport, and
• Computer system design and related services
Businesses will need to ensure that they collect contractor information form 1 July 2019, with the first annual report required August 2020.
3. Superannuation Related Changes
- Exemption from the work test for voluntary contributions
From 1 July 2019, an exemption from the work test will be introduced for voluntary contributions to superannuation, for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements. This exemption will give recent retirees additional flexibility to get their financial affairs in order in the transition to retirement. Currently, the work test restricts the ability to make voluntary superannuation contributions for those aged 65-74 to individuals who self-report as working a minimum of 40 hours in any 30-day period in the financial year.
- Three- yearly audit cycle for SMSF’s
If you haven’t already lodged your SMSF tax return for the year, now is a great time to do so!
From 1 July 2019, there will be a change to the annual audit requirement to a three-yearly requirement for SMSFs with a history of three consecutive years of clear audit reports that have lodged the fund’s annual returns on time.
- Increase in number of members for SMSF’s
The number of members allowable in a new or existing SMSF will increase from four to six members. This provides great flexibility for those with larger families.
As you can see there are lots of changes to come into play. Remember that this legislation needs to be passed through the Senate which, if the past is anything to go by, could be a considerable process.
We are more than happy to discuss how the Federal Budget will affect you and how you could benefit. Feel free to call and discuss your personal or business situation.
We are a small business accounting service located on the beautiful Sunshine Coast and would appreciate the opportunity to help you, your friends, family and colleagues. Contact us on 07 5451 1118 for obligation-free confidential discussions today.
