Scott Morrison’s budget announcement of personal income tax changes need no introduction, just a lot of patience.
The budget headlines have glossed over some of the important detail which we know will affect our business clients as well as everyone’s superannuation. Summarised below are the key take-aways which we’ve cherry picked for our clients. It is pleasing to see the extension of the instant asset write off and we cannot stress the importance of the changes to the Director Penalty Regime. If you are not paying or reporting your company BAS obligations on time we strongly recommend you speak with us urgently to minimise your risk of losing everything. This is a fundamental change to the protections previously provided to directors under the Corporations Act which should not be ignored. Take a close look at the superannuation changes as they will affect virtually everyone. If you’re a Trustee of an SMSF there are some more onerous compliance changes along with some potential welcomed audit relief.
The full report on the 2018 Budget is available here from our partner Thompson Reuters, but below are the key points to note.
Businesses
- $20,000 Instant Asset Write Off has been extended to 30 June 2019.
- Director Penalty Regime extended to now include GST, Luxury Car Tax and Wine Equalisation Tax, as well as PAYGW and superannuation.
- A reminder to those lodging their own BASs to ensure they are lodged on time, even if the company cannot pay at that time.
- Taxable Payment Annual Reporting (TPAR) regime affecting contractors is to be extended from the construction, cleaning and courier industries, to now include:
- Security providers and investigation services;
- Road freight transport services;
- Computer system design and related services.
- R&D Tax Incentive changes:
- The R&D Tax Incentive will become less attractive for businesses with turnovers in excess of $10M.
- The ATO will publish the details of R&D claimants, including amounts claimed.
- Employer incentives to engage older workers.
- Previously announced changes Division 7A loan repayment measures have been deferred to 1 July 2019
- No income tax deductions for payments where ABN or PAYG withholding amounts have not been withheld appropriately.
Individuals
- Introduction of a Low and Middle Income Tax Offset (LIMTO) of up to $530.
- Income tax brackets to be adjusted over seven years for resident taxpayers.
- Incentives for Baby boomers to stay in work.
- Medicare levy to stay at 2%.
- Increase in lower threshold Senior Australian Tax Offset (SATO) and Medicare Levy.
- Rental Properties – deductions are no longer available for vacant land.
- No change to existing ability to receive refundable franking credits.
Superannuation
- Increased maximum number of members from 4 to 6 in SMSFs and small APRA funds from 1 July 2019. Note:
- A deed change may be required if a fund is wanting to take advantage of this.
- This is yet another reason why we recommend corporate trustees for most SMSFs. State trust legislation may limit the number of individual trustees to 4.
- Audit cycle change from annually to every three years for SMSFs with clean audits and returns lodged on time for the preceding three years.
- SMSF supervisory levy charged by the ATO is set to increase from 1 July 2018.
- Introduction of a retirement income covenant which will require superannuation fund trustees to offer Comprehensive Income Products for Retirement (CIPRs).
Individual Superannuation
- Encouraging changes to protect those with small superannuation balances from excessive fees.
- A new Work Test exemption during the initial period after retirement will allow retirees with smaller superannuation balances to make additional contributions.
- This welcomed change will also reduce the paperwork requirements for these individuals and prevent them from inadvertently making excess superannuation contributions. Employees earning over $263,157 from multiple employers will be able to nominate wages from particular employers as not being subject to the superannuation guarantee, allowing them to negotiate a higher gross pay in lieu of the superannuation expense saved by the employer.
Other
- Boosts to ATO funding to increase taxpayer compliance and combat the black economy.
- This is part of why we offer Audit Insurance to all of our clients.
- Encouraging changes aged pensions and additional funding for home and mental health care for the aged.
- No reduction in the NDIS funding.
