Each Budget night accountants (in particular) are glued to their screens waiting on announcements that will change clients lives. Then each post budget morning we come in to the office early and digest dozens of budget commentaries, it really is an exciting time of the year. Except this year which was always going to be boring from Mr Scott Morrison our Federal Treasurer handing down an Election Year Budget i.e. cut taxes, no nasty surprises etc.
Personal Tax Cuts
Well nothing major but it is planned that personal income tax bracket thresholds over a seven-year period commencing 2018-19 for the threshold of personal income tax brackets to increase. It is minimal in the overall scheme of things and as there is an election due combined with a highly political senate before they flow – let us just put our excitements on pause.
However, for this year ahead the $87,000 tax bracket is to be increased to $90,000 (if it gets through). Forget about future years for the moment.
Increase to Medicare Levy low-income thresholds the 2017-18 financial year. The threshold for singles will increase to $21,980 per annum and, for families with no children, increase to $37,089 per annum. For those individuals and couples who are eligible for seniors and pensioners tax offset (SAPTO) the thresholds will increase to $34,758 per annum and $48,385 per annum respectively. The additional threshold amount for each dependent child or student will increase to $3,406 per annum.
The Government will retain the Medicare Levy rate at 2.0 per cent and will not proceed with the proposed increase to 2.5 per cent of taxable income from 1 July 2019.
Taxation of testamentary trusts The Budget introduces integrity measures for minors receiving income from 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.
Good news again – Extending of the $20,000 instant asset write-off for a further 12 months until 30 June 2019, small businesses with aggregated annual turnover of less than $10 million may continue to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019. Some assets are ineligible e.g. horticultural plants and in-house software.
Work test exemption from 1 July 2019 the Government will introduce an exemption from the work test for voluntary contributions to superannuation. This is available for the following retirees: • aged 65-74, • with superannuation balances below $300,000, and • in the first financial year that they do not meet the work test. The exemption will be available for 12 months from the end of the financial year in which they last met the work test. The work test currently requires individuals who are 65-74 to have worked at least 40 hours within 30 consecutive days in a financial year before they can make a personal contribution to superannuation.
Increasing the maximum number of members in self-managed superannuation funds and small APRA funds from 1 July 2019, the maximum number of members allowable in a new or existing self-managed superannuation fund (SMSF) or small APRA fund will increase from four to six.
Three-yearly audit cycle for some SMSFs. To reduce red tape for SMSFs with a history of good record keeping and compliance, the Government will change to a three-yearly audit requirement. This measure will start on 1 July 2019.
Exit fees and inactive superannuation funds from 1 July 2019 the Government will ban exit fees on all superannuation accounts.
It will also expand the ATO’s data matching process to proactively reunite inactive superannuation accounts with member’s active account where possible. Superannuation accounts with a balance under $6,000 and which have been inactive for a continuous period of 13 months, will be required to be transferred to the ATO to help accommodate this measure.
Insurance in super from 1 July 2019 insurance within superannuation will move from a default framework to be offered on an opt-in basis for members: • with balances of less than $6,000, • under the age of 25, and • whose accounts have not received a contribution in 13 months and are inactive.
Capping passive fees for low balance superannuation funds from 1 July 2019 the Government will introduce a 1.5 per cent semi-annual cap on administration and investment fees charged by superannuation funds on accounts with balances below $6,000.
Preventing inadvertent concessional cap breaches from 1 July 2018, the Government will allow individuals with multiple employers and whose income exceeds $263,157 to nominate that their wages from certain employers are not subject to the compulsory Superannuation Guarantee (SG) contributions. The employee could negotiate to receive additional income instead of the SG contributions from their employer.
Pension Work Bonus From 1 July 2019, the Pension Work Bonus will increase from $250 to $300 per fortnight with the maximum unused amount that can be accrued increasing to $7,800 (up from $6,500). In addition, the Government will extend the Pension Work Bonus to those who are self-employed.
Expanding the Pension Loan Scheme From 1 July 2019, the Government will expand eligibility to the Pension Loan Scheme to include all Australians of Age Pension age. The Government will also increase the loan amount so that an individual can receive a fortnightly amount up to 150 per cent of the maximum Age Pension rate. Under the scheme, individuals who are Age Pension age can obtain a loan (secured against the individual’s property) to increase their fortnightly pension payment from a part-rate or nil rate, up to the maximum pension rate. Other existing rules including age-based loan to value ratio limits, ability to repay the loan at any time or on the sale of the property and fortnightly compounding of interest at a rate of 5.25 per cent will continue to apply.
Introduce an Income Test for Carer Allowance From 20 September 2018 the Government will introduce a $250,000 annual Income Test threshold for the Carer Allowance and Carer Allowance (child) Health Care Card.
Main point derived with compliments from: https://www.adviseronlineportal.com.au/-/media/Campaigns/Documents/Federal-Budget-2018/FederalBudget201819ReportCopy.pdf