2018 Budget Overview - Mike Crowley & Associates

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2018 Budget Overview


After the carnage that was the 2016 Budget and a relatively uneventful 2017, what does Treasurer Scott Morrison have in store for us this year? 

Well, as it turns out, a few surprises along with some rather “courageous” revenue assumptions. Read on for our wrap-up in this year’s Budget.

Continuation of small business tax concessions
Many of the existing tax concessions for small businesses over the past few years will continue, despite there being no further direct tax relief in the budget.
The government is extending the $20,000 instant asset write-off for a further 12 months to 30 June 2019. It has also continued its existing commitments to a reduced corporate tax rate, an unincorporated small business tax discount, and the $10-million small business turnover threshold.
In addition, the government has announced a tax integrity measure in clarifying that unpaid present entitlements will now come within the scope of Division 7A.
From 1 July 2019, unpaid present entitlements will come within the scope of Division 7A of the Income Tax Assessment Act 1936, in a move that will ensure the unpaid present entitlement is either required to be repaid to the private company over time as a complying loan or subject to tax as a dividend.

Personal income tax bracket changes
The Government has provided personal income tax relief to lower and middle income earners. A Low and Middle Income Tax Offset will now be available for individuals with incomes of up to $125,333.
The $87,000 income threshold, above which a 37 per cent tax rate applies, will increase to $90,000.

Plans to battle the black economy
The government’s approach towards eliminating the black economy is part of a five-year implementation plan that will require co-operation between the states and government agencies.
Some of the tax-related measures, laid out in the budget in response to the Black Economy Taskforce final report, include:
– providing additional funding to the Tax Practitioners Board to take action against tax agents facilitating activity in the black economy
– removing deductions for non-compliant payments
– changing the government’s procurement procedures to incentivise tax compliance in supply chains
– consulting on reforms to the Australian Business Number (ABN) system
– introducing an economy-wide cash payment limit for large cash transactions of $10,000 to reduce the ability of black economy operators to use cash to avoid their tax and reporting obligations and launder the proceeds of crime
– expanding the taxable payments reporting system to contractors in industries with higher identified risks of not reporting their income

Changes to SMSF audit requirements
The government plans to change the annual audit requirement to a three-yearly requirement where SMSFs have a history of good record keeping and compliance.
The measure will apply to SMSF trustees with a track record of three consecutive years of clear audit reports and have lodged the fund’s annual returns in a timely manner.
The change is intended to start on 1 July 2017, but the government has said it will consult with stakeholders on the proposal.

Increasing the maximum number of members in self-managed superannuation funds and small APRA funds
From 1 July 2019, the maximum number of members allowable in a new or existing self-managed superannuation fund (SMSF) or small APRA fund will increase from four to six.

Work test exemption
The Government will provide more time for Australians aged 65 to 74 to boost their retirement savings, by introducing an exemption from the superannuation work test.
This exemption will apply where an individual’s total superannuation balance is below $300,000 and will permit voluntary superannuation contributions in the first year that they do not meet the work test requirements.

Life insurance cover in super to be opt-in for individuals under 25 years of age
The Government will legislate that life insurance cover in superannuation will be opt-in for those individuals under 25 years of age or with account balances under $6000 to ensure that unnecessary fees do not erode smaller balances. Life insurance cover will also cease where no contributions have been made for a period of 13 months.

Other changes

• A surplus of $2.2 billion is expected in 2019-20, one year ahead of schedule. 

• The Government’s planned increase in the Medicare levy from 2 per cent to 2.5 per cent, to fund the National Disability Insurance Scheme, will now not go ahead due to increased tax revenues.

For more detail please see the NTAA Budget 2018-19 update.

Source: Public Accountant Journal and NTAA.