What are the changes for Small Business
Not a great deal of changes for small businesses this year.
The Instant Asset Write-Off is being extended for another 12 months. This means any asset you purchase for your business that costs less than $20,000 can be claimed as a tax deduction in the year you purchase (as opposed to being claimed over the life of the asset). It's important to note this is a tax deduction only, so you need to be a) making a profit and therefore paying tax for this to be of benefit and b) you need to ensure you can afford to purchase the asset.
Again more red tape for small businesses. Those in the security & investigations services, road freight transport and computer design and related services will now need to complete Taxable Payments Reports at the end of each year from 1 July 2019. These industries join the courier and cleaning Industries as well as building and construction industries who also have to report all payments made to contractors. Another reason we recommend Hubdoc and Xero for our clients! If you are sending all Invoices from your Contractors to Hubdoc and these are flowing into Xero, the forms to complete at the end of the year are much easier as you have all documents at your finger tips.
Interestingly the ATO are targeting non compliance making certain payments non tax deductible! If you pay a contractor and that contractor doesn't provide you with an ABN you are supposed to withhold tax from the payment. If you fail to withhold this tax the ATO will deny the entire payment as a tax deduction. Similarly if you don't withhold tax from wages paid to employees (including yourselves) these payments will also be denied as tax deductions. It's super important that you have the correct paperwork from any contractors you use in business, and that you are withholding the right amount of tax. Note this doesn't come into play until 1 July 2019.
R&D Tax Incentives has certainly been a hot topic pre the budget. From 1 July 2018 cash refunds will be capped at $4million per annum (for those with income below $20million). The tax offset remains at 13.5% above your Company Tax Rate. The ATO will of course continue cracking down on claims so it's more important than ever to ensure you have your paperwork for R&D in order.
More bonuses for helping keep people over 50 in the workforce. The bonus is up to $10k. There is also an additional $2k skills and training grants available as well.
Expect the ATO to crackdown further on unpaid GST, PAYG and Super. $133.7 million will go to the ATO to deliver on a range of strategies to pursue tax debts.
What are the changes for Super
Certainly not a lot to report on for Super this year either.
The number of members you can have in a SMSF has now increased from 4 to 6 from 1 July 2019. This helps if you want to include other family members in your SMSF.
In a move to reduce red tape (yes REDUCE!), SMSF's who have a fantastic compliance history will only need to have SMSF Audited every 3 years rather than every year. The start date is 1 July 2019 so nothing changes for the next year. You will need to have 3 consecutive years of great Audit reports for your SMSF to qualify.
Again some practical changes for those who earn more than $263,157 and have multiple employers. At the moment each employer is required to pay 9.5% super, which means you breach the super contributions cap limits and have to pay additional tax on those contributions. From 1 July 2018 you will be able to nominate to your employers to not pay super so you don't breach the limits.
More good news for people with multiple super accounts and smaller super balances. The ATO will be automatically consolidating your lost super which is excellent. There will now be a 3% cap on fees charged by Super Funds for those with balances less than $6k and a complete BAN on exit fees when you want to change Superannuation Funds. Super is such a crucial and important component for all Australians so these changes are small but excellent.
Insurance in Super is also changing. If you are under 25, or have a balance of less than $6k or haven't contributed to super in the last 13 months you will automatically opt out of paying Life Insurance inside Super. Now we always suggest you seek professional advice on whether you should have Life Insurance or not, but these changes will certainly make things easier for opting out. Note this doesn't start till 1 July 2019.
For those aged 65-74 with balances below $300k in super you will no longer need to meet the work test to make voluntary super contributions. At the moment you need to be working a minimum of 40 hours in any 30 day period to contribute voluntarily to Super. Start date 1 July 2019, and note this only applies to the 1st year you stop working.
What are the changes for older Australians
Pension Loan Scheme allows Aged Pensioners to boost their income with a loan from the government against the equity in your home. $11,799 for singles or $17,787 for couples per year can be paid in fortnightly payments to supplement existing income. These payments are a loan with the government, attract interest and need to be repaid from sale proceeds of your house or can be repaid at any time.
Pensioner Work Bonus allows pensioners to earn an extra $1,300 a year in employment income without affecting pension payments. This means you can earn $468 / fortnight from work and get the max rate of age pension. For those self-employed you can earn $7,800 without reducing your pension.
What are the changes for Individuals
Much of the buzz behind the budget this year has been all about the cuts to personal income tax rates & the introduction of a new tax offset. To be honest these cuts will be fantastic if passed, but you won't see any real benefits for another 4 years.
From 1 July 2018 the threshold for the 37% tax bracket is increasing from $87k to $90k. That means those earning up to $90k won't pay more than 32.5% tax. If you earn $90k per year you will save $135!
A new tax offset has been introduced to start from 1 July 2018. If you earn less than $37k you will be entitled to $200 when you lodge your 2019 tax return (July 2019), if you earn between $48-$90k the offset is $530. If you earn between those amounts your offset will be staggered. This doesn't mean you get extra money in your wages each week, rather an additional amount once you lodge your tax return, next year, not this one.
The Medicare Levy was set to increase to 2.5%. This has been scrapped and the Levy will remain at 2%.
Changes to Personal Income Tax Rates from 1 July 2022 you will see the 19% tax bracket increase to $41k from $37k and the 32.5% tax bracket will be increased to $120k from $90k. Then from 1 July 2024 if you earn more than $41k you will pay 32.5% all the way up to $200k with income over $200k being taxed at 45%. This simply means from 1 July 2022 we will all be paying less tax.
Spending
So what's the gov spending money on that might be of benefit to you?
Transport program spending is at $24.5 billion.
Space Program has $41 million over 4 years to establish a national space agency. More funding has been allocated for supercomputers & leading research in AI.
Great Barrier Reef has $535.8 million over 5 years to deliver the 2050 reef plan.
$140 million over 4 years from 1 July to attract International Investment in film production in Australia.
$200 million has been earmarked for GPS Technology for Farmers.
$20 million is allocated to SME Export Hubs
And plenty of spending in the Health Sector.
Other things to note
Cash Payments greater $10k outlawed! The government is really looking to continue cracking down on the black economy to reduce tax evasion. This means businesses can no longer except cash payments of greater than $10k for goods and services.
Part of the crackdown from the ATO includes the ability to extend the Director Penalty Regime to GST, making directors personally liable for company debts. This is designed to capture Directors who are deliberately evading paying tax.
To level the playing field overseas online hotel booking websites will need to charge GST from 1 July 2019. At the moment overseas sites don't have to pay GST.
If you are a drone enthusiast expect some changes. $2.9million will go towards safety standards and compliance.
For those of you who are famous......aka sportspeople, actors etc some bad news in the budget. At the moment you can licence your fame to another entity ie a Company and therefore pay a lower rate of tax. From 1 July 2019 all income derived from a person's fame or image will need to be included as income in your individual return.
For our craft brewing friends some additional relief in the form of lower excise for smaller kegs. Concessional draught beer excise rates will now be extended to 8 litres or greater kegs, down from 48 litres. The excise refund scheme cap will be increased to $100k per financial year starting 1 July 2019.
Action Items
As always this is a general overview of how the budget affects you. The next step is for Growthwise to embark on your personal tax planning, ie what you need to do before 30th June to pay less tax. Look out for your personal checklist of action items over the coming weeks.
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