Tuesday night was marked in the Walker Hill’s team calendar as a must-do event and, as accountants, it’s one of our favourite times of the year – Budget Night! Between the Here-Here’s, budgeting increases and decreases and pizza and beers put on for the team, we also spent the evening understanding what changes will be coming our way and how they will affect you. We’ve summarised the three most relevant points below that will affect the 2019-2020 Budget.
The key areas that will affect you are:
- Personal tax cuts;
- Small business instant asset write-off increase; and
- ATO task force regulators receiving a funding injection to increase compliance
(Read the full budget breakdown HERE.)
PERSONAL TAX CUTS
Summary
The Budget announced a $19.5bn personal income tax cuts package, which has a planned to roll out schedule over the next seven years. An overview of this can be seen in the table below.
Essentially, there will be:
- An increase to the top threshold of the 19% personal income bracket to $45,000 from 1 July 2022;
- A reduction to a 30% tax rate for those earning between $45,001 – $200,000 by 1 July 2024;
- An increase to the low and middle-income tax offset (LMITO) to $1,080 from $530; and
- An increase to the low-income tax offset (LITO) to up to $700 from 1 July 2022.
Unfortunately, with the majority of changes not being seen until 2022 and 2024 in this area, it will be a while until you see any changes with your tax rate. It’s also important to consider that there are three budgets and two elections that will take place between now and then, which could result in changing legislation where these recommendations don’t go ahead.
Other areas where there have been changes include changes to the Medicare levy thresholds, one-off energy assistance payments, and Higher Education Loan Program.
SMALL BUSINESS INSTANT ASSET WRITE-OFF INCREASE
One of the most exciting changes announced in this budget, the instant asset write-off increases for small businesses. The current and popular $20,000 instant asset write-off will increase to $30,000 effective now until 30 June 2020 and will also include those businesses with aggregated turnover under $50 million, as shown in the table below.
Keep in mind that instant asset write-off only applies to certain depreciable assets and any assets previously purchased don’t qualify for the higher rate threshold. Similarly, asset purchases that are not installed and ready for use by 30 June 2020 will also be ineligible for the write-off.
For small businesses (aggregated turnover under $10m), assets costing $30,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter. However, if you’re thinking of purchasing a larger asset, we recommend speaking to your accountant before making the purchase to ensure compliance.
Keep in mind, however, that although this initiative in well in the pipeline, like all items mentioned in the Federal Budget, it is subject to the pass of legislation before being fully implemented, so hold off on any spending sprees until legislation has passed.
Other areas in business where this year’s Budget recommended changes is with Division 7A changes being postponed, luxury car tax refunds being increased to a maximum of $10,000 for primary producers and tourism operators and increased funding for Export Market Development Schemes.
COMPLIANCE
The Budget mentioned some increases to Compliance over the next few years, meaning that it’s more important than ever to make sure that you have your i’s dotted and t’s crossed. A $1bn funding increase over the next four years will be provided to the Australian Taxation Office (ATO) to increase with these compliance regulations.
There will also be an additional $42m provided to the ATO to recover unpaid tax and superannuation liabilities, with a focus on larger business and high wealth individuals. A Sham contacting unit is also expected to be established within the Fair Work Ombudsman for those who are intentionally doing the wrong things with contracts to avoid employment entitlements.
Another area that is worth noting is for business owners with ABNs, where the Budget outlines that you will be stripped of your number if you fail to lodge your income tax return.
Other areas where the Budget has highlighted changes include an increase for small business tax disputes and a registration scheme for Labour Hire operators.
FIND OUT MORE
If you want to find out more about what was accounted for in this year’s Budget, our Summary Guide is a great place to start.
However, the Walker Hill team is always happy to have a chat about more specific areas that may relate to you personally. Feel free to give us a call on 07 3367 3155 or email us at support@walkerhill.com.au to organise an in-depth discussion around how the budget changes could affect you.
