‘Christmas in May’ is the unofficial catchphrase of this year’s Federal Budget (given a Federal election is on the horizon), but officially it’s being referred to by the Government as a ‘Plan for a Stronger Economy’.
The 2018-19 Federal Budget, delivered on 8 May 2018 by Treasurer Scott Morrison, saw many proposed measures announced. These proposed measures carry on with the main principles that underpinned last year’s Federal Budget, e.g. stronger growth, guaranteeing the essentials and living within our means.
Below is an overview of some of the main proposed measures that may be relevant to you and your personal finances.
The Government has restated its commitment to returning the budget to surplus. Based on forward estimates and the medium term, the budget is forecasted for a: $14.5 billion deficit in 2018-19; $2.2 billion surplus in 2019-20; $11 billion surplus in 2020-21; $16.6 billion surplus in 2021-22. Importantly, the budget surplus is set to occur a year earlier than previously promised.
Personal Income Tax Plan
*This will be received as a lump sum on assessment after an individual lodges their tax return. Furthermore, this is in addition to the existing Low Income Tax Offset.
Retaining the Medicare levy rate at 2% and increasing the Medicare levy low-income thresholds
*For each dependent child or student, the threshold increases by a further $3,406, (previously $3,356).
Income tax exemption for certain Veteran Payments
From 1 May 2018, supplementary amounts (e.g. pension supplement and rent assistance) of Veteran Payments paid to a veteran, and full payments (inclusive of the supplementary component) made to the spouse/partner of a veteran who dies, will be exempt from income tax.
Deny deductions for vacant land
From 1 July 2019, expenses associated with holding vacant land will cease to be deductible if the land is not being used to carry on a business.
Improving the taxation of testamentary trusts
From 1 July 2019, the concessional tax rates available for minors receiving income from testamentary trusts will be limited to income derived from assets that are transferred from the deceased estate or the proceeds of the disposal or investment of those assets.
Further extending the immediate deductibility threshold
The $20,000 instant asset write-off will be extended by a further 12 months to 30 June 2019 for businesses with aggregated annual turnover less than $10 million.
Introduction of an economy-wide cash payment limit
From 1 July 2019, there will be a limit imposed of $10,000 for cash payments made to businesses for goods and services; they can only be paid electronically or via cheque. However, transactions with financial institutions or consumer to consumer non-business transactions will not be subject to this cash limit.
Enhancing the integrity of concessions in relation to partnerships
From 7:30pm (AEST) on 8 May 2018, partners that alienate their income by creating, assigning or otherwise dealing in rights to the future income of a partnership will no longer be able to access the small business capital gains tax (CGT) concessions in relation to these rights.
Extending anti-avoidance rules for circular trust distributions
From 1 July 2019, anti-avoidance measures will be extended to family trusts engaging in ‘round robin’ arrangements whereby the trusts act as beneficiaries of each other and the distribution is ultimately returned to the original trustee tax free.
Removing the capital gains discount at the trust level for MITs and Attribution MITs
Applying to payments made from 1 July 2019, Managed Investment Trusts (MITs) and Attribution MITs will no longer be able to apply the 50% capital gains discount at the trust level; ensuring that income is taxed in the hands of investors, as if they had invested directly.
Protecting Your Super Package
From 1 July 2019:
Work test exemption for recent retirees
From 1 July 2019, there will be an exemption from the work test 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. However, existing annual concessional (and, the carry forward rules) and non-concessional contribution cap limits will continue to apply to the contributions permitted by the exemption.
Increasing the maximum number of allowable members in SMSFs and small APRA funds
From 1 July 2019, the maximum number of allowable members in new and existing self-managed superannuation funds and small APRA funds will increase from four to six.
Three-yearly audit cycle for some SMSFs
From 1 July 2019, the annual audit requirement for self-managed superannuation funds will be changed to a three-yearly for those with a history of good record-keeping and compliance.
Preventing inadvertent concessional cap breaches by certain employees
From 1 July 2018, individuals who earn over $263,157 and have multiple employers will be allowed to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG). Due to this, employees who use this measure could negotiate to receive additional income, which is taxed at marginal tax rates.
Ongoing care and maintenance of Treasury portfolio legislation
Technical amendments will be made to legislation with regards to:
Skills Checkpoint for Older Workers Program
To support employees aged 45-70 to remain in the workforce, the Government will provide funding to establish the Skills Checkpoint for Older Workers Program. This will mean, starting from 1 September 2018, 5,000 employees each year would be entitled to receive customised career advice on transitioning into new roles, or their pathways to a new career, including referrals to relevant training options.
Jobs and skills for mature age Australians
The Government will provide funding to support mature age Australians, aged 45 years and over, to adapt to the transitioning economy and develop the skills needed to remain in work. This includes targeted funding, for example, to those considering early retirement or who are retrenched to look at alternatives to remain in employment.
Finances for a longer life
From 1 July 2019:
Healthy ageing and high quality care
Whilst there were many other proposed measures in the 2018-19 Federal Budget, we have focused predominantly on the ones that may relate to you and your personal finances. Other measures not mentioned include, for example, the infrastructure spend on road and rail projects (i.e. Melbourne Airport Rail Link, Bruce Highway, Perth Metronet, and Western Sydney Airport), funding for schools, public hospitals, and regulators, to name a few.
For more information on this year’s Federal Budget and what it may mean for you, please watch Jeremy Thorpe from PwC Australia discuss his thoughts, and the summary of the winners and losers by ABC News.
Please contact us if you wish to discuss any aspects of this year’s Federal Budget or how it may affect you.