(courtesy of CPA Australia in association with Wolters Kluwer)
The Federal Treasurer Mr Josh Frydenberg handed down the 2019-20 Federal Budget at 7.30pm (AEDT) on 2 April 2019.
Mr Frydenberg said the Budget is “back in the black”, announcing a budget surplus of $7.1 billion, and forecasting a surplus of $11 billion in 2020-21, $17.8 billion in 2021-22 and $9.2 billion in 2022-23. The Budget focuses on “restoring the nation’s finances”, further strengthening the economy to create more jobs and to “guarantee the essential services”.
The government proposes various changes to further lower individual taxes, including increasing the low and middle-income tax offset, and lowering the 32.5 per cent rate to 30 per cent in 2024-25. More businesses will have access to immediate deductions for asset purchases, with the expansion of the instant asset write-off to businesses with an annual turnover of less than $50 million.
The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at www.ministers.treasury.gov.au
The Parliamentary Budget Office also released the report on Australia’s Ageing Population Australia’s Ageing Population, which identifies a $36 billion deficit by 2028-29. This is larger than the projected cost of Medicare in that same year. The report notes that ageing is only one of many drivers of the future budget position. The ATO has released taxation statistics 2016-17, which include data from tax returns and related schedules for the 2016–17 income year for individuals, companies, superannuation funds, partnerships and trusts. The tax, superannuation and social security highlights are set out below.
• The legislated Personal Income Tax Plan will be changed to further lower taxes for individuals, including changes to the low and middle-income tax offset (LMITO), the low-income tax offset (LITO) and the personal income tax (PIT) rates and thresholds.
• The instant asset write-off threshold for businesses with an aggregated turnover of less than $10 million will be increased to $30,000 for eligible assets that are first used, or installed ready for use, from 7.30pm (AEDT) on 2 April 2019 to 30 June 2020.
• Businesses with an aggregated turnover of $10 million or more but less than $50 million will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from 7.30pm (AEDT) on 2 April 2019 to 30 June 2020.
• The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2018-19 income year.
• Payments to primary producers in the Fassifern Valley, Queensland affected by storm damage in October 2018 will be treated as exempt income.
• An income tax exemption will be provided for qualifying grants made to primary producers, small businesses and non-profit organisations affected by the North Queensland floods.
• Six more organisations have been approved as specifically-listed deductible gift recipients.
• The list of countries whose residents are eligible to access a reduced withholding tax rate of 15 per cent on certain distributions from Australian managed investment trusts (MITs) will be updated.
Tax integrity and black economy
• Australian Business Number (ABN) holders will be required to lodge their income tax return and confirm the accuracy of their details on the Australian Business Register annually to retain their ABN status.
• The start date of amendments to Div 7A will be delayed by 12 months to 1 July 2020.
• Minor amendments will be made to the hybrid mismatch rules to clarify their operation from 2019.
• The ATO’s Tax Avoidance Taskforce will extend its operations and expand its activities, including increasing its scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes.
• The ATO will receive funding to increase activities to recover unpaid tax and superannuation liabilities with a focus on large businesses and high wealth individuals.
• A dedicated sham contracting unit will be established within the Fair Work Ombudsman to address sham contracting behaviour by some employers.
• Members of regulated superannuation funds will not have to meet the work test after 1 July 2020 if they are 65 or 66 years of age.
• The restrictions on claiming the spouse contribution tax offset will be eased from 1 July 2020, giving 70 to 74year old spouses eligibility.
• The calculation of exempt current pension income will be simplified for superannuation funds from 1 July 2020, allowing a preferred method of calculation and removal of some actuarial certificates.
• Transitional tax relief for merging superannuation funds will become permanent from 1 July 2020.
• SuperStream will be expanded from 31 March 2021 to include electronic ATO requests for release of superannuation funds and SMSF rollovers.
• An expression of interest process will be undertaken to identify options to support establishment of a Superannuation Consumer Advocate.
• For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000.
• Access to refunds of indirect tax, including GST, fuel and alcohol taxes under the Indirect Tax Concession Scheme has been granted or extended.
• There will be a one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple eligible for qualifying payments on 2 April 2019 and who are resident in Australia.
• Single Touch Payroll reports lodged by employers will be shared with social security agencies from 1 July 2020.
• Family Tax Benefit eligibility will be extended to the families of ABSTUDY (secondary) student recipients who are aged 16 years and over, and are required to live away from home to attend secondary school.
• From 1 July 2019, net income generated from the forced sale of livestock will be exempted from the Farm Household Allowance payment assessment, when that income is invested into a farm management deposit.
• The HELP debt incurred for recognised teaching qualifications after teachers have been placed in very remote locations of Australia for four years (or part-time equivalent) will be extinguished. Indexation on HELP debts of all teachers while they are placed in very remote locations will no longer accrue from 14 February 2019.
Wage and salary earners
The Treasurer announced A$158 billion in personal income tax cuts through more than doubling the low and middle-income tax offset from 2018/19.
This will benefit more than 10 million people earning up to A$126,000 a year.
From July 2024, Frydenberg says the government will cut the 32.5 per cent marginal tax rate to 30 per cent, applying to all taxpayers earning between A$45,000 and A$200,000.
He says the top 5 per cent of taxpayers will pay one third of all income tax collected.
The instant asset write-off will be extended to June 2020 and increased from A$25,000 to A$30,000.
The write-off allows small business with a turnover of less than A$10 million to claim an immediate deduction for a purchase below that amount but will be expanded to businesses with turnover of up to A$50 million, or another 22,000 businesses.
Businesses will also be able to claim the deduction every time they make a purchase under the cap.
The write-off remains an annual deduction. CPA Australia has called for the write-off to be made permanent rather than extended budget to budget, to give business owners greater certainty when planning.
The government will defer to July 2020 the start date of the proposed amendment to Division 7A of the Tax Act, to allow further consultation.
CPA Australia has argued the Treasury-proposed changes to how business owners can make loans from private companies will discourage investment.
Building and transport industries
The government announced increased investment in infrastructure spending, to improve rail links and address road black spots, with the Treasurer naming several projects in major state capital cities and also rural and regional Australia.
The budget includes increasing the Urban Congestion Fund to A$4 billion from A $1 billion, to cut travel times in Australia’s rapidly-growing cities.
A A$500 million Commuter Car Park Fund would improve access to public transport hubs.
He promised A$2.2 billion for roads, A$1 billion to improve freight routes and access to ports and A$100 million for regional airports.
A A$525 million skills package would create 80,000 new apprenticeships in industries with skills shortages and double to A$8,000 the incentive payments to employers per apprenticeship placement.
There were also announcements to create new training hubs, give new apprentices a A$2000 incentive payment, and invest in science, technology and research.
The budget papers commit to major spending in regional and rural areas to expand water infrastructure, provide drought relief and upgrade regional airports.
Frydenberg announced A$725 million for aged care, with 10,000 new home care packages and capital works focused on regional Australia.
Single pensioners will get a A$75 one-off cash payment for their energy bills, while couple pensioners will get A$125. The ALP is expected to support the measure.
Australians suffering from cancer, heart disease, epilepsy and who live in rural areas are likely to benefit from several major investments in assistance programs and medication. The budget also contains A$461 million for youth mental health and suicide prevention.
Superannuation industry and older Australians
People approaching retirement will be able to boost their superannuation balances, with those aged 65 and 66 years able to make voluntary contributions without satisfying the work test, from July 1 2020. Currently, people aged 65 and older must work a minimum 40 hours over a 30-day period.
Frydenberg said the measure will align the work test with the eligibility age for the Age Pension, due to rise to 67 years from July 1, 2023. About 55,000 people will benefit from the reform.
People aged 65 and 66 will also be able to access the “bring forward arrangements” to make three years’ worth of non-concessional contributions (capped at A$100,000) to their super in a single year.
This currently stops at 65 years.
The age limit for spouse contributions will be increased from 69 years to 74 years.
CPA Australia’s Paul Drum said that a fairer and more flexible solution would be to introduce lifetime caps and “revisit” abolishing the work test.
There were few measures for corporate Australia, although many of the largest companies would benefit from spending in infrastructure, either as providers or users of improved services.
Regulatory burden on business
Business will pay more fees to regulators, through the industry funding model for the Australian Securities and Investments Commission (ASIC) and higher levies to the Australian Prudential Regulation Authority (APRA).
As part of a response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, there will be extra funding to ASIC of A$38.5 million in 2019/20 and A$118 million in 2020/21, possibly funded by extra fees to business.
APRA will get A$16.9 million and A$19 million over the same period.
The budget allocates the Australian Taxation Office an extra A$1 billion over four years to expand its Tax Avoidance Taskforce.
Frydenberg announced the Australian Financial Complaints Authority will receive additional funding to establish a historical redress scheme for financial complaints dating back to 1 January 2008.
CPA Australia welcomed additional funding for APRA, ASIC and the Federal Court given the findings of the royal commission.
“But unfortunately, the significant cost increases that the ASIC user pays funding model places on our members and others delivering services regulated by ASIC have not been addressed in this budget,” said Paul Drum.
“This government-imposed cost pressure will not only negatively impact smaller accounting practices and others providing financial services, but also consumers in the future.”
CPA Australia previously recommended the government not pursue its full cost recovery model for funding ASIC’s regulatory activities, and that it reinstate funding previously cut from the ASIC budget.
“The government can expect to hear more from us on this,” Drum added.
The government has not introduced measures that would encourage Australians to save outside the superannuation regime.
The Government will establish a new body, Sport Integrity Australia, to carry out anti-doping and integrity functions, and a National Sports Tribunal to hear and resolve rule violations. The Government has also signed up to the Council of Europe Convention on the Manipulation of Sports Competitions.