What the 2018 Federal Budget means for your business, family & superannuation
David Edmunds, SiDCOR Financial Analyst
The 2018 budget was released last night, with the consensus being that there wasn’t a great deal of material changes to both the tax system and government spending. That being said, the budget will likely have some impact on all Australians. Below are the key ways the budget is likely to impact your business, family & superannuation:
Small business write-off to continue – The business lobbies didn’t get their way in having the small business $20,000 instant asset write-offs becoming a permanent feature, but they will continue into the 2019 financial year for businesses turnover less than $10m. Good news for any business owner who was uncomfortable about accelerating asset purchases into the 2018 financial year to take advantage of this.
No withholding, no deduction – One of a string of integrity features in the budget, the government is looking to crack down on businesses who don’t withhold PAYG where they are required to do so. From 1 July 2019 any business not withholding PAYG to employees, where withholding requirements apply or withholding on contractors where ABN details are not provided, will no longer be able to claim these expenses as deductions.
Cap on cash business payments – In an effort to shrink the cash economy, reduce money laundering and terrorism funding the government will limit cash payments for goods & services to $10,000 from 1 July 2019. Included in these measures are added resources to ensure compliance with these changes. Note these changes will not affect consumer to consumer payments.
R&D Changes – Following recently announced plans by the Government to provide added scrutiny of R&D grants, changes have been made that predominantly impact businesses with turnover greater than $20 million. These businesses will see their R&D offset reduce as their R&D expenditure as a percentage of turnover falls. For those businesses turning over less than $20 million cash refunds will be capped at $4 million per year.
Increased scope to stop phoenix activity – Illegal phoenix activity remains a focus area for the government, which will develop an identification system to better monitor the activity of company directors, as well as extending the Directors Penalty Regime to GST, making directors personally responsible for these liabilities.
Low-income tax offset – The existing low-income tax offset will be increased in the 2019 financial year. The benefit of this will grow for individuals earning up to $90,000, where it peaks at $530. The benefit then tapers off and finishes at $125,000. It is important to note that being a tax offset change, this benefit will be felt when you lodge your 2019 tax return. If you wanted an incentive to get your tax return lodged early this is it!
Small tax bracket adjustment, with big ones to come – The only tax bracket change for the coming year will be the increase of the $87,000 threshold to $90,000. There are some big changes in the pipeline, albeit a long way away. Following some transitional arrangements in place for the 2023 & 2024 financial years, the government will then look to scrap the 37% tax bracket all together in the 2025 financial year, with a marginal tax rate of 32.5 applying to all taxpayers earning between $41,000 and $200,000.
Medicare Levy freeze – The scheduled rise in the Medicare levy from 2% to 2.5% in the 2019 financial year will no longer go ahead.
Benefits for older Australians – There are a number of changes intended to make life easier for both working and non-working older Australians. These include:
Additional resources will be provided to help retrain and encourage employment of people over the age of 45.
Expansion of the Pension Loan Scheme (providing reverse mortgages) to assist retirees who are asset rich and cash poor
Pensioners being able to earn an extra $1,300 without having their pension affected.
Vacant land deductions – In a deliberate attempt to discourage land banking, deductions on vacant land will be eliminated, including interest. The deductions will not be able to be carried forward to future years but can add to the property cost base if certain criteria are met.
More resources to ensure tax compliance – The government will continue to throw more resources to ensure taxpayers are both up to date and the accuracy of lodgements. We are expecting the ATO to be more active in these efforts in the coming year.
Other wins worth mentioning - An additional $1.4 billion has been allocated to add some additional medicines on the PBS. Power bills are also estimated to fall by $400 per household from 2020 due to the national energy guarantee. AND the government is trying to arrest the scourge of rising beer prices with craft brewers likely to benefit from changes to the excise rates!
A carrot to tidy up your super accounts – If tidying up your super accounts has been haunting your to-do list for a while, the time to do this could be just around the corner. From 1 July the government will ban exit fees on all superannuation funds. There will also be a 3% cap on passive fees charged on super funds with balances below $6,000.
Reduction in audits for the well behaved - SMSFs with 3 years of clear audits and who have lodged their returns on time will now only be required to be audited every 3 years.
More the merrier – From 1 July the cap on members of a self-managed super fund will be increased from 4 to 6. Good news for larger families.
Work Test changes – Individuals aged 65-74 with super balances of less than $300,000 will be exempt from meeting the work test in the 2019 financial year, allowing them to make both concessional and non-concessional contributions to increase their assets held in super.