If you're interested in finding out what key changes are most likely to impact you, keep reading.
Last week Scott Morrison presented the Turnbull Government’s 3rd budget. This budget is best described as ‘incremental’ and has a large focus on integrity measures and cuts to the individual tax paid by most Australians.
Personal Income tax
- Tax rate thresholds for middle income earners – the upper middle-income tax bracket will be increased from $87,000 to $90,000 starting 1st July 2018.
- Low and Middle income tax offset – the Government will introduce a new non-refundable Low and Middle Income Tax Offset, designed to provide up to $530 of tax relief for taxpayers earning up to $90,000. This offset then phases out to nil from $90,001 to $125,000.
- Additional relief – Further measures were announced relating to lower tax rates and higher income tax offsets from 1 July 2022. However, as the opposition has not yet provided their support to these measures we will have to wait and see if these additional measures come to fruition.
- Accelerated depreciation concession - The government has announced that it will extend the accelerated depreciation concession to 30 June 2019. The accelerated depreciation concession is available to businesses with an aggregated turnover less than $10million and for asset purchases under $20,000.
- Land banking measures – Integrity measures will be introduces to discourage land owners from holding vacant land. It is expected that from 1 July 2019 that certain tax deductions will be denied for expenses (such as interest, rates and insurances) associated with vacant last. These measures should not apply however to vacant land used in the operation of a business or for primary production purposes.
- Unpaid present entitlements – from 1 July 2019, distributions made by trusts to group companies, which remain unpaid, will be treated as related party loans for tax purposes. Where these ‘loans’ are then not put on complying loan terms or dealt with appropriately, deemed dividends may be taxed to beneficiaries. For taxpayers who operate their business through a trust and have a company beneficiary, this change could result in some ‘top-up’ needing to be paid.
- Small fund membership increase – The allowable membership base of small superannuation funds (ie SMSF’s) will increase from four to six. This may therefore allow a greater asset pool to be accessed by a family self managed super fund and provide access to greater investment opportunities that may not have otherwise been accessible.
- Three yearly audit – the current requirement for SMSF’s to undergo yearly audits will be changes to a three-yearly requirement, starting from 01/07/2019. This will only be available to funds with a good compliance history
- Work test exemption – the government will allow more time for taxpayers aged 65 to 74 to increase their retirement savings by introducing an exemption from the super work test, for the first year of retirement. However, this exemption would not apply to taxpayers with a member balance in excess of $300k.
Research and Development
- Changes to R&D incentives – for companies with a group turnover of less than $20million access to the R&D incentive will remain largely unchanged but a reduced rate of 41% will apply from 1 July 2018 (down from 43.5%). For companies with a group turnover in excess of $20million, the R&D tax benefit will be determined based upon the claimants “R&D intensity” which will be calculated with reference to the companies R&D spend as a percentage of total expenditure.