What the 2018 Federal Budget means for you

Treasurer Morrison brought down his third budget last night. The measures propose to bring the budget to surplus by 2019-20, a year earlier than predicted last year.

We are pleased to present you with some highlights that will impact you, our valued clients. 

Individuals 

• A seven-year Personal Income Tax Plan will be implemented in three steps, to introduce a low and middle income tax offset, to provide relief from bracket creep and to remove the 37% personal income tax bracket.  
• The 2017/18 Federal Budget measure to increase the Medicare levy from 2% to 2.5% of taxable income from 1 July 2019 will not proceed.  

• The ATO will be provided with $130.8m from 1 July 2018 to increase compliance activities targeting individual taxpayers and their tax agents.  

Income Tax 

• Significant changes to the calculation of the R&D tax incentive will commence for income years beginning on or after 1 July 2018. Additionally, a maximum cash refund will also apply for some entities.  
• The $20,000 instant asset write-off will be extended for small businesses by another year to 30 June 2019. 

• Amendments to Div 7A will strengthen the unpaid present entitlements (UPE) rules from 1 July 2019. 
• The start date of targeted amendments to Div 7A, announced in the 2017 budget, will be deferred from 1 July 2018 to 1 July 2019.  
• 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.  

Superannuation 

• The annual audit requirement for self-managed superannuation funds will be changed to a three-yearly requirement for funds with a history of good record keeping and compliance.  
• 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.  
• 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.  
• A 3% annual cap will be introduced on passive fees charged by superannuation funds on accounts with balances below $6,000, and exit fees on all superannuation accounts will be banned.  

Other changes 

• The taxable payments reporting system for payments to contractors will be expanded to include security services, road freight transport and computer system design industries, effective from 1 July 2019.  
• Alcohol excise refund scheme cap increased from $30,000 to $100,000 per financial year from 1 July 2019, and lower excise rates will apply for smaller beer kegs.  

For a detailed Tax and Accounting Overview on the 2018 budget click here.

We will be discussing these changes with many of our clients as part of year-end tax planning. If you would like further information or to book an appointment to discuss the impact on your personal situation please contact us.