2019 Federal Budget – How it affects your business, super and the tax you pay
The 2019 Federal Budget was announced last night, around a month earlier than usual. Few would argue it is not an election budget, with some clear incentives to try and sway voters to the coalition for the election expected in May.
I have analysed the policies announced with a focus on the impact to small and medium businesses, superannuation and your personal tax position. Most of the significant policy changes won’t occur in the coming financial year, but there are some immediate impacts worth knowing about.
It is important to note that all the provisions in the budget will not be enacted immediately and are likely to be contingent upon a coalition election victory. Please keep this in mind when considering any opportunities you may see in these announcements.
I hope you find some benefits in there for your business or family.
Instant asset write-off gets bigger and broader – the instant asset write-off will jump from the current $20,000 to $30,000 and now be available for businesses with a turnover of up to $50 million, which is great news for business owners considering any significant plant and equipment investment. This allows the particular asset to be written off in the year of acquisition, bringing forward the associated tax deduction. Please note that the $30,000 applies from budget night presuming it is legislated.
Also, it is important to note that the asset needs to be less than $30,000. So, if you have an asset that is $30,000 or over the instant asset will not apply. It would need to be equal to or less than $29,999.99.
Source: Budget Paper No. 2 pages 14-15; Budget Overview: pages 14 and 35, and Treasurer's Media Release: Our plan for a stronger economy.
More money for the regulators – A continued theme from recent budgets is a growing push for great compliance by businesses with Australian financial laws. The focus remains on the big end of town and high wealth individuals, with more funding (billions) for the ATO, ASIC and APRA to ensure compliance.
Stay up to date to keep your ABN – If you are significantly behind in your income tax lodgements you are being put on notice (and we’re here to help!). From July 2021 you will need to lodge your tax return to hold onto your ABN.
Further incentives for putting on apprentices – If you are in the construction (selective trades), baking or hairdressing industry take note. Additional funding will be available for both employers and apprentices upon hitting key milestones within these industries. For employers this will be up to $8,000 and $2,000 for the apprentices themselves.
True contractors or employees? If you are pushing the boundaries on whether your contactors are in fact employees be aware there is more funding for the Fair Work Ombudsman to crack down on this.
Division 7A amendment changes pushed back a year – A more complex area, the previously announced changes will be pushed back from starting to July 2020.
Queensland flood and storm support – For those who may have suffered in the recent, devastating Queensland storms and floods, there are further tax benefits for those in receipt of qualifying grants and payments to primary producers.
Super contributions later in life – to better align the superannuation age requirements with the Aged Pension, 65 and 66 year old’s will now be able to contribute to super without meeting the work test, including being able to use the bring forward rules. Beyond allowing further family wealth into super, this also has the potential to better smooth balances between family members if they are around the $1.6m cap.
Spousal contributions age limit extended – increased from 70, individuals up to and including those aged 74 will now be able to receive spousal contributions.
New tax offset increased – The previously announced Low to Medium Income Tax Offset (LMITO) has been increased from a maximum of $530 to $1,080. Those with incomes of between $48,001 and $90,000 will see the full benefit, with scaled benefits both below and up to $126,000. This is available for the 2019 financial year, so some added incentive for anyone applicable to get their tax work ready in July and August 2019.
Tax rates to get flatter, but not for a while – Potentially the most significant budget announcement is the 30 per cent marginal tax rate for income earners earning between $45,000 and $200,000. This won’t be happening for quite some time yet (from July 2024), but there will be some transitional benefits along the way.