The Federal Budget for 2019/20 was handed down by the Treasurer, Mr Josh Frydenberg, at 7.30 pm (AEST) on 2 April 2019.
The key tax and superannuation highlights from the Budget are summarised below. A detailed summary can be found at the link above.
The legislated Personal Income Tax Plan will be changed to further lower taxes for individuals, including changes to the low and
middle income tax offset (LMITO), the low income tax offset (LITO) and the personal income tax (PIT) rates and thresholds.
Immediate changes to LMITO
The LMITO will be changed such that the reduction in tax it provides will increase from a maximum amount of $530 to $1,080 pa, and the base amount will increase from $200 to $255 pa for the 2018/19 to 2021/22 income years.
The LMITO will provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less. Between taxable incomes of $37,000 and $48,000, the value of the offset will increase at a rate of 7.5 cents per dollar to the maximum offset of $1,080. Taxpayers with taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1,080. From 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 received after individuals lodge their 2018/19 tax returns and will continue to be provided in addition to the LITO.
Changes to 19% PIT bracket and LITO from July 2022
From 1 July 2022, the top threshold of the 19% PIT bracket will increase to $45,000 (up from $41,000 as legislated under the Plan).
From 1 July 2022, the LITO will increase to $700 (up from $645 as legislated under the Plan). The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 (instead of at 6.5 cents per dollar between taxable incomes of $37,000 and $41,000 as legislated under the Plan). The LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667. Together, the increase to the top threshold of the 19% PIT bracket and the changes to LITO will lock in the reduction in tax provided by the LMITO when the LMITO is removed.
Further changes to PIT rates and thresholds from July 2024
From 1 July 2024, the 32.5% marginal tax rate will be reduced to 30%.
From 1 July 2024, the 37% bracket will also be abolished
Instant asset write-off threshold
The instant asset write-off threshold for businesses with an aggregated turnover of less than $10m will be increased to $30,000 for eligible assets that are first used, or installed ready for use, from 7.30 pm (AEDT) on 2 April 2019 to 30 June 2020.
The current rules regarding accelerated depreciation for small businesses will remain in place. Therefore, assets that cannot be immediately deducted will need to be pooled and depreciated at an initial rate of 15% in the first year and 30% in each subsequent year. Also, small business depreciation pools valued under the instant asset write-off threshold at the end of the income year can be immediately deducted. The current “lock out” laws for simplified depreciation rules, which prevent small businesses from re-entering the pooling rules for five years if they opt out, will continue to be suspended until 30 June 2020.
Businesses with an aggregated turnover of $10m or more but less than $50m will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from 7.30 pm (AEDT) on 2 April 2019 to 30 June 2020.
The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2018/19 income year.
The threshold for singles will be increased to $22,398. The family threshold will be increased to $37,794. For single seniors and pensioners, the threshold will be increased to $35,418. The family threshold for seniors and pensioners will be increased to $49,304. For each dependent child or student, the family income thresholds increase by a further $3,471.
Income tax exemption for storm and flood grants
Payments to primary producers in the Fassifern Valley, Queensland affected by storm damage in October 2018 will be treated as exempt income.
An income tax exemption will be provided for qualifying grants made to primary producers, small businesses and non-profit organisations affected by the North Queensland floods.
Deductible gift receipts
Six more organisations have been approved as specifically-listed deductible gift recipients.
- Australian Academy of Law;
- China Matters Limited;
- Foundation Broken Hill Limited;
- Motherless Daughters Australia Limited;
- Superannuation Consumers Centre Limited; and
- The Headstone Project (Tasmania) Incorporated.
Withholding tax rate
The list of countries whose residents are eligible to access a reduced withholding tax rate of 15% on certain distributions from Australian managed investment trusts (MITs) will be updated to add Curaçao, Lebanon, Nauru, Pakistan, Panama, Peru, Qatar and the United Arab Emirates.
Tax integrity and black economy
Australian Business Number (ABN) holders will be required to lodge their income tax return and confirm the accuracy of their details on the Australian Business Register annually to retain their ABN status.
The start date of amendments to Div 7A will be delayed by 12 months to 1 July 2020. The proposed amendments announced in the 2018 and 2016 Federal Budgets will undergo further consultation with stakeholders.
Minor amendments will be made to the hybrid mismatch rules to clarify their operation from 2019.
The ATO’s Tax Avoidance Taskforce will extend its operations and expand its activities, including increasing its scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes.
The ATO will receive funding to increase activities to recover unpaid tax and superannuation liabilities with a focus on large businesses and high wealth individuals.
A dedicated sham contracting unit will be established within the Fair Work Ombudsman to address sham contracting behaviour by some employers.
Members of regulated superannuation funds will not have to meet the work test after 1 July 2020 if they are 65 or 66 years of age.
The restrictions on claiming the spouse contribution tax offset will be eased from 1 July 2020, giving 70 to 74 year old spouses eligibility. Although eligibility criteria has been extended for some spouses, there is no change announced to the:
- amount of the offset;
- income limits of the spouse;
- restrictions relating to the spouse’s contributions caps; or
- non-refundable attribute of the offset itself.
The calculation of exempt current pension income will be simplified for superannuation funds from 1 July 2020, allowing a preferred method of calculation and removal of some actuarial certificates.
Currently, some superannuation funds have a restriction on whether they can use the segregated method or proportionate method when calculating the ECPI. Also, funds which stop using the segregated method in an income year cannot go back to using it. From the 2020/21 financial year, all superannuation funds have the option to choose a preferred method of calculation.
Also, from 1 July 2020, an actuarial certificate will not be required for superannuation funds which have solely retirement phase accounts.
Since December 2008, tax relief has been available for qualifying superannuation funds that have merged. This allowed a deferral of capital gains or losses, similar to other scrip-for-scrip rollovers.
This tax relief will be made permanent from 1 July 2020.
SuperStream will be expanded from 31 March 2021 to include electronic ATO requests for release of superannuation funds and SMSF rollovers.
An expression of interest process will be undertaken to identify options to support establishment of a Superannuation Consumer Advocate.
For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000.
Access to refunds of indirect tax, including GST, fuel and alcohol taxes under the Indirect Tax Concession Scheme has been granted or extended.
There will be a one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple eligible for qualifying payments on 2 April 2019 and who are resident in Australia.
Single Touch Payroll reports lodged by employers will be shared with social security agencies from 1 July 2020.
Family Tax Benefit eligibility will be extended to the families of ABSTUDY (secondary) student recipients who are aged 16 years and over, and are required to live away from home to attend secondary school.
From 1 July 2019, net income generated from the forced sale of livestock will be exempted from the Farm Household Allowance payment assessment, when that income is invested into a farm management deposit.
The HELP debt incurred for recognised teaching qualifications after teachers have been placed in very remote locations of Australia for four years (or part time equivalent) will be extinguished. Indexation on HELP debts of all teachers while they are placed in very remote locations will no longer accrue from 14 February 2019.