Last night, the Federal Budget for the 2018/2019 tax year was handed down, and we were watching. Find out how the announcements will affect individuals, families and business.

Individuals

Tax Rates

The new personal tax rates are below. The Federal Government’s seven year Personal Income Tax Plan will combat Bracket Creep, by phasing out the 37 percent tax bracket completely, and protecting middle income Australians from bracket creep over their working life. This initiative covers around 23 per cent of tax payers and it is anticipated that the adjustment to the marginal tax bracket will stop a further 200,000 Australians entering the 37% marginal tax rate bracket. It encourages individuals to seek additional work and advancement, knowing their extra income will not be tax more harshly.

Low and Middle Income Tax Offset

For taxpayers with taxable income of $37,000 or less, the Low and Middle Income Tax Offset will provide a benefit of up to $200.

Between taxable income of $37,000 and $48,000, the value of the offset will increase by 3 cents in the dollar up to the maximum offset of $530. It is noted that taxpayers with taxable incomes between $48,000 and $90,000 will be eligible to receive the $530 maximum offset.

The offset will phase out at a rate of 1.5 cents per dollar between taxable income between $90,001 and $125,333.

Medicare Levy

The Medicare Levy will remain the same in the 2018/2019 year.

Business

Company Tax Rate

The company tax rate will remain at 27.5% for businesses with an annual turnover of $10 million dollars.

$20,000 Instant Asset Write Off

The small business instant asset write-off has been extended for a further 12 months to 30 June 2019. Small businesses are able to immediately deduction eligible assets up to the value of $20,000 first used or installed by 30 June 2019. Further, the small business simplified pool may also be immediately deducted if the balance is less than $20,000.

Cash Payment Limit

The ATO have proposed a measure that will introduce a limit of $10,000 for cash payments made to businesses for good and services. It is currently proposed that the measure would apply from 1 July 2019. This measure is to target the ‘cash economy’ and business who try to avoid or launder money from criminal activity. The measure will require transactions over a threshold to be made through an electronic payment system or cheque.

Removing the Tax Deductibility of Non-Compliant Payments

A tax deduction would not be allowed for the following where PAYG is not withheld:

• Wages
• Payments made by business to contractors where the contractor does not provide an ABN.

The measure will take place from 1 July 2019. PAYG reporting and tax withholding requirements provide integrity to the tax system. The Black Economy Taskforce recommended this action to create a further financial disincentive for businesses to engage in black economy behaviour and ensure greater compliance with tax obligations.

If you would like to know more about how the budget affects your personal circumstances, please contact our office for an appointment.