Budget Tax Implications 2019/2020
The Federal Budget has been released, and there are a number of changes which will affect Australian’s.
For Individual’s, the Government is looking to increase the upper threshold of the 19% bracket from 1 July 2022 to $45,000. Beginning 2025 income year, the Government wants to decrease the marginal tax rate from 32.5% to 30%.
Voluntary superannuation contributions for people aged 65 and 66 years will be allowed from 1 July 2020, with no work tests required. In addition, people aged 65 and 66 years will be entitled to make up to three years of non-concessional contributions without having to fulfil work test requirements. The age limit for spouse contributions is to be increased to 74. At the moment, people over the age of 70 are not entitled to receive spouse contributions.
The start date for the opt-in insurance superannuation changes has been delayed to 1 October 2019. The opt-in insurance superannuation changes mean people under 25 and accounts with less than $6,000 will be able to choose whether they want insurance with their superannuation.
Singles, families, seniors and pensioners will all benefit from increases to the Medicare levy low income thresholds.
Low and Middle income earners are set to benefit with the LMITO Offset. The Government has announced they will increase this non-refundable tax offset up to a maximum of $1080 (base amount $255) for the 2019-2022 financial years. This will be received following lodgement and assessment of Individual Tax returns. Any LMITO Offset received is in addition to the current Low Income Tax Offset (LITO). The government has proposed an increase to the current LITO to a maximum amount of $700. Effective 1 July 2022 the LMITO and LITO will combine into one offset known as LITO, which will be capped at $645 per annum.
For small business, the instant asset write-off has been proposed to increase to $30,000, effective 2 April 2019 to 30 June 2020. This is on an asset by asset basis, which means businesses can write off more than one asset per year. It is currently legislated that small businesses can claim an instant asset write-off of up to $20,000 that are in use or installed and ready to use by 30 June 2019. Small businesses are businesses with an aggregated annual turnover of less than 10 million.
On 29 January 2019 the government stated they would increase this asset write-off to $25,000 and extend until 30 June 2020. Therefore, when legislated small businesses will be able to claim the $25,000 for eligible assets from 29 January 2019. This bill is currently before parliament awaiting an outcome.
Assets which are not eligible for the immediate write-off are able to be placed into a low value pool and depreciated at 15% the first year and 30% each year thereafter. The low value pool balance can be immediately deducted if it is less than the instant asset write-off threshold for the year.
Excitingly, it has been proposed to extend this instant asset write-off to medium sized businesses. Medium sized businesses are businesses with an aggregated annual turnover of $10 to $50 million dollars. These businesses will be entitled to the asset write-off for eligible assets purchased after 2 April 2019. Any assets purchased which cost more than the instant asset write-off threshold must be depreciated following the existing depreciating assets tax law.
Changes to the Div 7a law have been postponed to take effect from 1 January 2020.
The Government will now require ABN holders to lodge an income tax return if they have an obligation (from 1 July 2021) and confirm their details annually (from 1 July 2022).
The government has committed funds to a number of initiatives to help recoup unpaid debts and settle disputes. This includes a promise of $1 billion dollars in funding over four years from 2020 to target tax avoidance in multinationals, large public and private companies and trusts. In addition, the Government have committed $42.1 million to the ATO to help recoup unpaid tax and superannuation. The Government have stated this will not be targeted towards small business. Finally, the Government will aim to assist small businesses with tax disputes by committing $57.5 million from 1 March 2019 to enable an efficient, cost effective review of their dispute.