PERSONAL TAXATION

Personal tax offsets
The Government announced a tax relief for low and middle income earners. The non-refundable low and middle income tax offset from 2018–2019 to 2021–2022, is designed to provide tax relief of up to $530 for each of those years.
The offset will be delivered on assessment after an individual submits their tax return, and will be in addition to the existing low income tax offset (LITO).
Also, increase to the top threshold of the 32.5% tax bracket from $87,000 to $90,000 from 1 July 2018. Focus-Professional-Group-Personal-Tax-Offsets

Medicare levy, 2017–2018 tax rates unchanged
The Government had proposed to increase the Medicare levy from 2% to 2.5% from 1 July 2019, but has decided not to proceed with this.
The tax rates and thresholds for the 2017–2018 year remain unchanged.


BUSINESS TAXATION

$20,000 instant asset write-off for SBEs extended by 12 months
The Government will extend the current instant asset write-off ($20,000 threshold) for small business entities (SBEs) to 30 June 2019. This applies to businesses with aggregated annual turnover less than $10 million.
While the extension of the write-off will be welcomed, SBEs of course need to have the cash-flow to enable them to spend the $20,000 in the first place.

Deductions disallowed for holding vacant land
The Government will disallow deductions for expenses associated with holding vacant land. Where the land is not genuinely held for the purpose of earning assessable income, expenses such as interest costs will be denied. It is hoped this measure will reduce the tax incentives for land banking which limit the use of land for housing or other development.
Disallowed deductions will not be able to be carried forward for use in later income years. Expenses for which deductions will be denied could be included in the cost base if it would ordinarily be a cost base element (ie borrowing costs and council rates) for CGT purposes. However, if the denied deductions are for expenses would not ordinarily be a cost base element, they cannot be included in the cost base.
This measure applies from 1 July 2019.

Partnerships: enhancing integrity of concessions
Partners that alienate their income by creating, assigning or otherwise dealing in rights to the future income of a partnership will no longer be able to access the small business capital gains tax (CGT) concessions in relation to these rights.

Focus-Professional-Group-Business-Taxation-ClockThe Government said this measure will prevent taxpayers, including large partnerships, inappropriately accessing the CGT small business concessions in relation to their assignment to an entity of a right to the future income of a partnership, without giving that entity any role in the partnership.
There are no changes to the small business CGT concessions themselves. The concessions will continue to be available to eligible small businesses with an aggregated annual turnover of less than $2 million or net assets less than $6 million.
These measures will apply from 7:30PM (AEST) on 8 May 2018.


TAX COMPLIANCE AND INTEGRITY

No tax deduction for non-compliant PAYG and contractor payments
Measures will be enacted to ensure that taxpayers will not be able to claim deductions for payments to their employees such as wages where they have not withheld any amount of PAYG from these payments, despite the PAYG withholding requirements applying.
Similarly, the Government intends to remove deductions for payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (again despite the withholding requirements applying).
The measures will commence on 1 July 2019.

Cash payments limit: payments made to businesses
The Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services.
The rules will not apply to transactions with:

  • financial institutions; or
  • financial institutions; or
  • consumer-to-consumer non-business transactions.

The limit will apply from 1 July 2019. The Government will consult further as part of the implementation process.
Reportable payments system extended: security providers, road freight transport and computer design
The Government will extend the taxable payments reporting system (TPRS) already applying to the building and construction industry, to the following industries from 1 July 2019:

  • security providers and investigation services;
  • security providers and investigation services;
  • road freight transport; and
  • computer system design and related services.

The TPRS requirements will also be extended, from 1 July 2018, to the cleaning and courier industries under measures contained in the Treasury Laws Amendment (Black Economy Taskforce Measures No 1) Bill 2018.


SUPERANNUATION

SMSF member limit to increase from four to six
The Budget confirmed that the maximum number of allowable members in new and existing self-managed superannuation funds (SMSFs) and small APRA funds will be expanded from four to six members from 1 July 2019.
The proposed increase to the maximum number of SMSF members seeks to provide greater flexibility for large families to jointly manage retirement savings.
As each member must be a trustee of the fund, a decision to add extra members should not be taken lightly as it can add complexity to the fund’s management and investment strategy. A change to the membership of an SMSF will alter the trustee arrangements which can impact who controls the fund in the event of a dispute. This is especially relevant in the event of the death of a member, as the surviving trustees have considerable discretion as to the payment of the deceased’s super benefits (subject to any binding death benefit nomination).

Superannuation work test exemption for contributions by recent retireesFocus-Professional-Group-Superannuation-Hands-Together
The Government will introduce an exemption from the work test for voluntary superannuation contributions by individuals aged 65–74 with superannuation balances below $300,000 in the first year that they do not meet the work test requirements.
Currently, the work test restricts the ability to make voluntary superannuation contributions for those aged 65–74 to individuals who self-report as working a minimum of 40 hours in any 30-day period in the financial year. The measure will give recent retirees additional flexibilities to get their financial affairs in order in transition to retirement. It will apply from 1 July 2019.

Super fees to be capped at 3% for small accounts, exit fees banned
Passive fees charged by superannuation funds will be capped at 3% for small accounts with balances below $6,000, while exit fees will be banned for all superannuation accounts from 1 July 2019. These measures form part of the Government’s Protecting Your Super Package.
The proposed ban on exit fees will also benefit members looking to rollover their super accounts to a different fund, or who hold multiple accounts and see exit fees as a barrier to consolidating accounts.
Superannuation insurance opt-in rule for younger and low-balance members
The Government will change the insurance arrangements for certain cohorts of superannuation members from 1 July 2019. Under the proposed changes, insurance within superannuation will move from a default framework to be offered on an opt-in basis for:

  • members with low balances of less than $6,000;
  • members with low balances of less than $6,000;
  • members under the age of 25 years; and
  • members with inactive accounts that have not received a contribution in 13 months.

These changes seek to protect the retirement savings of young people and those with low balances by ensuring their superannuation is not unnecessarily eroded by premiums on insurance policies they do not need or are not aware of.
The changes also seek to reduce the incidence of duplicated cover so that individuals are not paying for multiple insurance policies, which they may not be able to claim on in any event. Importantly, these changes will not prevent anyone who wants insurance from being able to obtain it. That is, low balance, young, and inactive members will still be able to opt in to insurance cover within super.
The changes will take effect on 1 July 2019. Affected superannuants will have a period of 14 months to decide whether they will opt-in to their existing cover or allow it to switch off.