On Tuesday 2nd April 2019, Treasurer Josh Frydenberg unveiled the Coalition government’s pre-election budget promising a 7.1 billion surplus. Entity Solutions’ Business and Tax division (EBAT) have discussed the impact of these budget changes with our partner, FMD Financial, and have rounded up some key features that will affect independent professionals and businesses.
The Coalition has proposed personal tax cuts in a 3-step process over a 7 year period. Here’s how it works:
- The maximum Low and Middle Income Tax Offset (LMITO) will increase from $530 to $1,080 per year until 2022. This means taxpayers with income between $18,200 and $126,000 will receive some form of tax cut and those between $48,000 and $90,000 will receive the maximum amount.
The Labour Party have also backed this change, meaning it will take effect from 1st July and is a nice bonus you’ll see reflected in your 2019 tax returns!
- From 1st July 2022, the 19% marginal tax rate bracket will increase from $37,000 to $45,000 and the 32.5% marginal tax rate bracket from $90,000 to $120,000.
- From 1st July 2024, the 32.5% tax rate will reduce to 30% and will also be extended to $200,000 (effectively removing the 37% tax bracket completely). This means that the 45% tax bracket will then start from $200,000.
There is increased scope for voluntary super contributions in the 2019 budget announcement.
After 1st July 2020, people will be able to make voluntary super contributions until the age of 67 without having to meet the work test. Previously, the work test needed to be met for people over the age of 65.
Furthermore, the age of people able to bring-forward three years of non-concessional (after-tax) contributions in a single financial year will increase from 65 to 67.
Effectively enhancing the ability to boost your super later in life, this ruling will make retirement planning more flexible for people as they approach retirement.
The 2019 budget has increased the Instant Asset Write-Off for small businesses and also extended it to medium sized businesses.
There has been an increase in the instant asset write-off for small businesses from $25,000 to $30,000 per eligible asset. Small businesses will now be able to claim the deduction for every asset that is purchased under this cap on an annual basis.
This write-off will be implemented as permanent legislation to allow small businesses to plan their investments more strategically and with greater certainty, as opposed to relying on an extension following each budget decision.
The aggregated turnover threshold was also increased from $10 million per annum to $50 million, which allows approximately 22,000 more medium-sized businesses to access this deduction. The deduction for these medium-sized businesses will be available from Budget night until 30th June 2020. The same applies to small business entities who will also be able to immediately deduct purchases of eligible assets from 2nd April to 30th June 2020.
Education & Training
In response to Australia’s growing skills shortage, the Coalition has unveiled a government package targeting the education and training sector.
They have invested in a skills package for apprenticeships to increase the number of apprentices learning in-demand skills across industries with identified skills shortages. Aspiring apprentices are also being offered a $2,000 bonus to take up a trade.
Furthermore, employers who take on apprentices in areas of need are being offered $8,000 per placement, which is double the amount they are currently being offered.
Please review FMD Financial’s 2019 full Federal Budget Summary for a more in depth analysis of the proposed changes.
FMD Financial Budget Analysis
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