How do the Budget 2018 announcements affect you? Jennifer Rees Manager at William Buck, outlines the impact the changes will have on you; Including personal Income tax, small business, superannuation and key areas pertinent to health.
Personal Income Tax
The Government has proposed a seven-year Personal Income Tax Plan to be implemented over the next seven years.
From 1 July 2018, a Low and middle income tax offset (LMITO) will be available as a tax offset to taxpayers with taxable incomes up to $125,333, in addition to the low-income tax offset.
| Taxable Income | LMITO |
| Less than $37,000 | $200 |
| $37,001 to $48,000 | Increases from $200 at a rate of three cents per dollar to maximum of $530 |
| $48,001 to $90,000 | $530 |
| $90,001 to $125,333 | $530 less 1.5 cents per dollar taxable income over $90,000 |
The Government has also proposed relief from bracket creep for middle income tax payers and the removal of the 37% personal income tax bracket:
From 1 July 2018, the 32.5% personal income tax bracket will be increased from $87,000 to $90,000.
From 1 July 2022:
- The 19% personal income tax bracket will be increased from $37,000 to $41,000.
- The 32.5% personal income tax bracket will be increased from $90,000 to $120,000
- The low-income tax offset will be increased from $445 to $645. It will be phased out a rate of 6.5 cents per dollar of taxable income between $37,000 and $41,000 and then at a rate of 1.5 cents per dollar of taxable income between $41,000 and $66,667.
From 1 July 2024, the 37% tax bracket will be removed and the 45% personal tax bracket will be increased from $180,000 to $200,000.
| 2017/2018 | 2018 / 2019 – 2021/2022 | 2022/2023 – 2023/2024 | 2024/2025 | ||||
| $ | Rate | $ | Rate | $ | Rate | $ | Rate |
| $18,201 | 19% | $18,201 | 19% | $18,201 | 19% | $18,201 | 19% |
| $37,001 | 32.5% | 37,001 | 32.5% | $41,001 | 32.5% | $41,001 | 32.5% |
| $80,001 | 37% | 90,001 | 37% | $120,000 | 37% | – | – |
| $180,001 | 45% | 180,001 | 45% | $180,001 | 45% | 200,001 | 45% |
The proposed increase to the Medicare levy from 2% to 2.5% (announced in the 2017/2018 Federal Budget) will not proceed. The low-income Medicare levy thresholds will be increased from the 2017/2018 year.
Small businesses
Currently an immediate tax deduction is available on assets costing less than $20,000 for small businesses with an aggregated annual turnover of less than $10m. This tax deduction has been extended for another 12 months and will cease on 30 June 2019. Unless there is further legislative change the threshold will revert to $1,000 from 1 July 2019.
Superannuation
The Government announced several small changes to superannuation, including:
- From 1 July 2019, self-managed funds with a good compliance history (tax returns and audit) will be eligible for a three-year audit cycle instead of the current annual audit requirement.
- The maximum number of members allowed in a self-managed fund will increase from 4 to 6 individuals from 1 July 2019.
- From 1 July 2019, an individual between 65 and 74 years of age who has a superannuation balance of less than $300,000 will be able to make a voluntary superannuation contribution to their superannuation fund in the first year that they fail to satisfy the work test criteria (working 40 hours in a consecutive 30-day period).
- From 1 July 2018 individuals with taxable income over $263,157 and who have multiple employers can elect to have wages from certain employers not subject to superannuation guarantee. This will allow eligible individuals to avoid breaching the $25,000 concessional cap.
- More resources will be provided to the ATO to identify individuals who claim personal superannuation contributions in their income tax returns and do not submit the ‘notice of intent’ form to their superannuation fund.
- Changes will be made to protect smaller superannuation balances of less than $6,000
Other measures
- The Government intends to fully implement the previously announced plan to reduce the tax rate for all companies to 25% by 2027.
- From 1 July 2019 businesses, will only be able to claim tax deductions for payments of salary and wages to their employees where they are have met their PAYG withholding obligations. Also, businesses will only be able to claim tax deductions for payments to contractors if they have provided their ABN or they have withheld PAYG if they have not provided their ABN if required to do so.
- The Government has proposed that a limit of $10,000 be introduced for cash payments made to businesses for goods and services. Payments over the threshold would need to be made electronically or by cheque.
- The concessional tax rates for minors receiving income from testamentary trusts will be limited to income derived from assets from the deceased estate or the proceeds of the disposal of those assets.
- The Government has proposed to deny tax deductions for expenses associated with holding vacant land from 1 July 2019, unless the land is used to carry on a business. It is intended that land held for commercial development will be excluded due to the “carrying on a business” test. Expenses that are not allowed to be treated as a tax deduction may be able to be added to the costs base of the asset for Capital Gains Tax purposes provide conditions are met.
Health-specific measures
- The Government has announced $83.3 million will be provided over five years to achieve stronger rural, regional and remote health outcomes. It is intended that the Stronger Rural Health Strategy will provide better teaching, training, recruitment and retention of Australian doctors.
- The Government will invest $9.5 million over five years to continue to improve Medicare compliance arrangements and debt recovery practices.
- In response to the Medicare Review Taskforce recommendations, a number of changes to ‘Guarantee Medicare’ have been made to the Medicare Benefits Schedule.
- $28.2 million will be provided over five years to upgrade e-prescribing software.
- There will be a focus on Aged Care funding to support people to stay at home longer, remain healthy and independent for longer, and to improve access to high quality, safe aged care. This includes delivering an additional 14,000 new high level home care packages over four years from 2018-19 in addition to the 6,000 packages delivered in 2017-2018.
- Significant investment into mental health, including protecting the elderly, suicide prevention and continued support for those ineligible for the NDIS.
- From 1 January 2019 the Government will set a planning target of around 2,100 overseas trained doctors each year, targeting visas for GP’s to areas of doctor shortages.
Disclaimer: The contents of this article are in the nature of general comments only, and are not to be used, relied or acted upon with seeking further professional advice. William Buck accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. Liability limited by a scheme approved under Professional Standards Legislation. The above information is current as at 30th May 2018.
