Home » Uncategorized » Budget 2019 – Review by Julius Mather (Principal Northcity Accountants)

Budget 2019 – Review by Julius Mather (Principal Northcity Accountants)

3 April 2019.

Besides the return to a Budget surplus for the first time in 12 years, clearly, the headline tax announcement are the proposed changes to the personal income tax rates and the respective income tax brackets.

Consistent with the Government’s recent economic narrative, announcements as they apply respectively to large and small business reinforce the message that large business pay its “fair share” of tax (cue the increase in funding to the ATO’s Tax Avoidance Taskforce) whilst small
businesses (this concept now extended to medium businesses with turnover of less than $50m) are to receive additional concessions such as an increase in threshold for instant asset write-off from $25,000 to $30,000 on a per asset basis. Also, the recent trend for superannuation fund mergers may continue to accelerate with the announcement to make the tax relief available for super fund mergers permanent.

A final matter which should not go unnoticed is that the status of a number of important pieces of legislation before Parliament remains unclear. It would be hoped that the major parties over the course of the imminent election campaign make clear what their respective intentions are in
connection with these outstanding reforms.

Personal Tax – For Individuals.

Personal income tax cuts: Personal Income Tax Plan

We referred to the ‘Personal Income Tax Plan’ (PITP) in last year’s Budget update.

The Government announced that it will extend the PITP relief as follows.

Step 1: Introduction of the Low and Middle Income Tax Offset

The Low and Middle Income Tax Offset (LMITO) was introduced as a non-refundable tax offset available for the income years ending 30 June 2019 to 30 June 2022. The offset depends on the amount of taxable income earned by an individual taxpayer in a given income year.

The Government will provide for a further reduction in tax provided through the LMITO by increasing the available offset so that:

  • for taxable income of $37,000 or less, an LMITO of $255 will be available;
  • between taxable incomes of $37,000 and $48,000, the LMITO will increase at a rate of 7.5 cents per dollar up to the maximum offset of $1,080;
  • between taxable incomes of $48,000 and $90,000, a maximum offset of $1,080 will be
    available; and
  • for taxable incomes of $90,000 to $126,000, the offset will phase out at a rate of 3 cents per dollar.

The LMITO will be available via assessment after individuals lodge their tax returns for the income years ending 30 June 2019 to 30 June 2022, at which point the LMITO will be replaced by the changes discussed at Step 2 below.

Simpler personal income tax system

The Government now proposes to go one step further than the original PITP by lowering the existing 32.5% rate to 30%. As a result, from 1 July 2024, a tax bracket of 30% will apply to taxable income between $41,001 and $200,000. The top marginal tax rate of 45% (unchanged from the current top marginal tax rate) will apply to taxable income exceeding $200,000.

Increase to the Medicare levy for low-income thresholds

The Government proposes to increase the Medicare levy thresholds for singles, families and pensioners to account for recent movements in the Consumer Price Index.

Broadly the thresholds will be increased as follows:

Singles: From $21,980 to $22,398
Families: From $37,089 to $37,794
Single seniors and pensioners: $34,758 to $35,418

Small Business:

Expansion of instant asset write-off

The instant asset write off will be extended to medium sized businesses and the threshold increased from $25,000 to $30,000 per asset.

The new threshold will apply to small businesses with aggregated turnover of up to $10 million from 2 April 2019 until the end of the measure on 30 June 2020. The existing threshold of $25,000 continues to apply to assets that are first used, or installed ready for use prior to 2 April 2019.

Medium businesses with turnover between $10 million and $50 million will gain access to the instant asset write off for assets up to the threshold of $30,000 that are first used, or installed ready for use, from 2 April 2019 to 30 June 2020.

Superannuation

A number of superannuation measures were announced as part of the Budget, including:

  • Superannuation’s contributions work test – The current work test is removed for those aged 65 and 66. The current work test requires that people aged over 65 work for a minimum of 40 hours over a 30 day period in the financial year before they can make voluntary contributions to their superannuation account. The work test will continue to apply to those aged over 66.
  • Non-concessional contributions – Individuals aged 65 or 66 will now be able to make up to three years of non-concessional contributions under the bring-forward rule. Those over the age of 66 are still unable to make such contributions.
  • Spouse contributions age limit increase – The limit will be increased to 74 years.

Budget Estimates 17/18 to 22/23

 

 

Other Budget Matters 2019/2020

One-off payments to cover energy bills

More than 3.9m Australians will receive one-off payments of $75 for singles and $125 for couples to help cover energy bills. The payments of $75 for singles and $125 for couples will go to 2.4 million pensioners, 744,000 disability pensioners, 280,000 carers, 242,000 single parents and 225,000 veterans and their dependents – provided legislation is passed by 1 July.

Permanent migration target to be reduced by 30,000

The government will cut the permanent migration target to 160,000, down from the current cap of 190,000.

$100bn spending on infrastructure

The centrepiece of this year’s budget, the government has pledged a $100bn, 10-year spend on infrastructure for roads and rail, bridges, dams, and ports. Around $42bn is earmarked for spending in the next four years.

One-off payments to cover energy bills

More than 3.9m Australians will receive one-off payments of $75 for singles and $125 for couples to help cover energy bills. The payments of $75 for singles and $125 for couples will go to 2.4 million pensioners, 744,000 disability pensioners, 280,000 carers, 242,000 single parents and 225,000 veterans and their dependents – provided legislation is passed by 1 July.

 

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