With an election due to be called any day now, it’s no surprise that last night’s budget contained a few sweeteners to woo voters across most demographics.
There were tax cuts for most individuals, cash handouts to pensioners and welfare recipients, big spending on infrastructure and a reiteration of the promise to return the budget to surplus in 2019/20.
We have outlined the key announcements below:
increase to the non-refundable low and middle-income tax offset
In last year’s budget the government implemented a 7 year plan to reduce personal income tax. A key measure in this plan was the introduction of a new non-refundable low and middle income tax offset. This offset will be applied as a lump sum on lodgement of your tax return for the 2018/19, 2019/20, 2020/21 and 2021/22 financial years.
The government have announced that they intend to more than double this offset, for taxpayers in the target income band between $48,000 and $90,000. This is intended to apply as follows:
|Taxable income||Current offset amount||Proposed offset amount|
|$37,000 or less||$200||$255|
|$37,001 to $48,000||$200 plus 3 cents per dollar over $37,000||$255 plus 7.5 cents per dollar over $37,000|
|$48,001 to $90,000||$530||$1,080|
|$90,001 to $125,333||offset phases out at rate of 1.5 cents per dollar over $90,000||offset phases out at a rate of 3 cents per dollar over $90,000|
This offset will apply in addition to the existing low-income tax offset of $445. This offset is currently legislated to increase to $645 from 1 July 2022. The government announced in the budget that this offset will be increased to $700 from 1 July 2022 with adjustments to how this offset phases out.
changes to personal tax rate thresholds
In addition to the increased tax offset, the government also announced that it would further reduce the tax rate for individuals earning between $45,000 and $200,000. The tax rate for this income bracket will reduce to 30% from 1 July 2024. This change is summarised in the table below:
|Taxable income||Current tax rate (2024/25 year)||Proposed tax rate (2024/25 year)|
|$18,200 or less||0%||0%|
|$18,201 to $45,000||19%||19%|
|$45,001 to $200,000||32.5%||30%|
immediate deduction for low-cost assets expanded
The instant asset write off is to be expanded to assets costing less than $30,000. It is also being made available to businesses with a turnover of less than $50 million (currently limited to $10 million turnover). Given the announcement in January to increase the threshold to $25,000, this effectively creates three time periods in the 2018/2019 year with different eligibility rules. The proposed rules are summarised below:
|Turnover limit||Asset write-off limit||Time period|
|Existing law||Up to $10m||$20,000||Up to 30 June 2019|
|Proposed law (period 1)||Up to $10m||$20,000||Up to 28 January 2019|
|Proposed law (period 2)||Up to $10m||$25,000||29 January 2019 to 1 April 2019|
|Proposed law (period 3)||Up to $50m||$30,000||2 April 2019 onwards|
increase in works test exemption for super contributions
Under the existing law, individuals aged 65-74 must work at least 40 hours in any 30-day period in the financial year in order to make voluntary super contributions. This is referred to as the ‘works test’.
From 1 July 2020 people aged 65 and 66 will not be required to satisfy the ‘works test to make voluntary contributions. You will also be able to utilise the ‘bring forward’ rule for voluntary (non-concessional) contributions up to age 66.
Spouse contributions will also be extended to people aged 70 and 74 years of age [previously you couldn’t receive a spouse contribution if you were aged 69 or over]
new ABN holder requirements
From 1 July 2021, all ABN holders with an income tax obligation will be required to lodge income tax return. From 1 July 2022 they will also be required to confirm the accuracy of ABN registration details with the Australian Business Register on an annual basis in order to retain their ABN.
In summary, there are very few fundamental changes outlined in this years budget. This is not a surprise given the election is just around the corner.
It is important to note that these measures are only proposals and reliant on the Coalition returning to government following the upcoming election. Caution should be taken in relying on any of these proposals, particularly the expansion of the instant asset write off rules.