2018 State and Federal Budget Snapshot
The black economy
Following the black economy taskforce review, there will be new compliance obligations for some businesses with the further extension of the TPRS (Taxable Payments Reporting System) to security and investigation services, road freight transport and computer design and related services.
A $10,000 limit on cash payments is to be introduced, to reduce money laundering and tax evasion.
Employers and contractors who do not meet withholding obligations will be denied tax deductions.
Tougher rules for illegal phoenixing activities are proposed, including increased liabilities for directors.
The Australian Taxation Office (ATO) will receive additional funding to ramp up its debt collection activities – for both tax and super liabilities.
Research and development tax concession
The Government will be tightening access to R&D tax concessions, forecasting a saving of $2 billion over four years.
The Treasurer announced an extension of the $20,000 instant asset write-off for another year, allowing businesses with turnover of up to $10 million a year to claim an immediate deduction for a purchase of below $20,000.
The write-off had been due to reduce to $1000 on June 30, 2018.
Compliance activity targeting
The ATO will be provided with $130.8 million from 1 July 2018 to increase compliance activities targeting individual taxpayers and their tax agents.
Seven year personal income tax Plan
The Government will introduce a Personal Income Tax Plan over a seven year period that involves 3 steps:
Step 1: 2018-19 to 2021-22
- Introduction of a Low and Middle Income Tax Offset of up to $530pa, in addition to Low Income Tax Offset (LITO), from 2018-19 to 2021-22
- Extend the top threshold for the 32.5% personal income tax bracket from $87,000 to $90,000
Step 2: 2022-23 to 2023-24
- Extend the top threshold for the 19% personal income tax bracket from $37,000 to $41,000
- Extend the top threshold for the 32.5% personal income tax bracket from $90,000 to $120,000
- Increase LITO from $445 to $645
Step 3: 2024-25 and later financial years
- Removal of the 37% personal income tax bracket
- Extend the top threshold for the 32.5% personal income tax bracket from $120,000 to $200,000
Deductions for expenses associated with holding vacant land not genuinely used to earn assessable income will be denied.
The small business capital gains tax (CGT) concessions will not apply to partners alienating rights to future partnership income.
Payments to employees and contractors are no longer deductible where any amounts that are required to be withheld are not paid, from 1 July 2019.
Tax exempt entities that become taxable after 8 May 2018 will not be able to claim tax deductions that arise on the repayment of the principal of a concessional loan.
The 50 per cent capital gains discount for managed investment trusts (MITs) and attribution MITs (AMITs) will be removed at the trust level.
`The list of countries whose residents are eligible to access a reduced withholding tax rate of 15 per cent on certain distributions from Australian managed investment trusts (MITs) will be updated.
Self-Managed Super Funds (SMSF)
The Government will amend the definition of Self-Managed Superannuation Funds (SMSFs) in the SIS Act to increase the maximum number of members in new and existing funds from four to six. This change is also proposed to apply to Small APRA Funds from the same date. This will be effective from 1 July 2019.
The Government will allow certain SMSFs to move from an annual to a three-yearly audit cycle where they have three consecutive years of clear audit reports, and lodged the fund's annual returns in a timely manner. This will be effective from 1 July 2019
Individuals whose income exceeds $263,157, and have multiple employers, will be able to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG) from 1 July 2018.
Individuals will be required to confirm in their income tax returns that they have complied with "notice of intent" requirements in relation to their personal superannuation contributions, effective from 1 July 2018.
An exemption from the work test for voluntary contributions to superannuation will be introduced from 1 July 2019 for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements.
Insurance arrangements for certain superannuation members will be changed from being a default framework to being offered on an opt-in basis.
A 3 per cent annual cap will be introduced on passive fees charged by superannuation funds on accounts with balances below $6000, and exit fees on all superannuation accounts will be banned.
The financial institutions supervisory levies will be increased to raise additional revenue of $31.9 million over four years, from 2018-19.
The Medicare Levy low income thresholds to increase. The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2017-18 income year.
The threshold for singles will increase to $21,980 (up from $21,655 in 2016-17). The family threshold will increase to $37,089 (up from $36,541 in 2016-17). For single seniors and pensioners, the threshold will increase to $34,758 (up from $34,244 in 2016-17). The family threshold for seniors and pensioners will increase to $48,385 (up from $47,670 in 2016-17). For each dependent child or student, the family income thresholds increase by a further $3,406 (up from $3,356 in 2016-17).
Retaining the Medicare levy at 2 per cent, the 2017-18 Federal Budget measure to increase the Medicare levy from 2 per cent to 2.5 per cent of taxable income from 1 July 2019 will not proceed. Consequential changes to other tax rates that are linked to the top personal income tax rate, such as the fringe benefits tax rate, will also not proceed.
Employment for those aged over 45
$17.7 million to support entrepreneurs through the Entrepreneurship Facilitators Program, with a focus on those aged over 45 years.
The Skills and Training Incentive, which will provide $2,000 per worker to fund reskilling opportunities for eligible individuals aged 45 to 70. This will be matched by either the individual or the employer.
Tax for Business
Up to $300 million over two years to states who reduce unnecessary regulatory restrictions on competition and small businesses through the National Partnership on Regulatory Reform.
From 1 July 2019, the concessional tax rates available for minors receiving income from testamentary trusts will be limited to income derived from assets that are transferred from the deceased estate, or the proceeds of the disposal or investment of those assets.
National Register of enduring powers of attorney
The Government will work with the States and Territories to establish a National Register of Enduring Powers of Attorney.
Foreign buyers will be charged a 7% levy when purchasing residential property. The surcharge is an increase from the previously announced 4%, and will bring WA in line with other states. It will be introduced from 1 January 2019.
There will be significant liquor reforms to reduce red tape for applicants to the hospitality industry to support local businesses.
New Industries Fund of $17.8 million over four years for new and emerging businesses.
$11.8 million for the Small Business Development Corporation (SBDC). The SBDC supports new and existing small businesses in Western Australia with a range of free advisory services and workshops.
Large employers will be hit with a progressive payroll tax hike from June next year, one the Government insists will be temporary.