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11 Apr 2019

2019 Federal Budget Recap

The Morrison Government is
touting its 2019-2020 Federal Budget as one that includes something for
everyone whilst getting the nation’s balance sheet back in the black. Key call-outs
include changes to the low-mid tax offsets for individuals, an increase to the
limit for immediate tax deduction of capital assets to $30,000 coinciding with
an extension to the turnover threshold, allowing access by medium sized
businesses. There were also several increased measures and spending in relation
to tax avoidance in general.

To save you wading through a
gazillion pages, we’ve summarised the key measures that are most relevant to
our clients.

Personal Tax Reforms

Don’t book that holiday to Bali
just yet. Whilst there are proposed changes to personal income tax rates, these
are not proposed for introduction until 2022. However, from 1 July 2019 it has
been proposed to increase the low and middle income tax offset (LMITO) from
$530 to $1,080. 

LMITO current

$0 – $37,000 Up to $200
$37,001 – $48,000 $200 +3% of excess over
$37,000
$48,001 – $90,000 $530
$90,001 – $125,333 $530 – 1.5% of excess over
$90,000
$125,334+ Nil

LMITO proposed

$0 – $37,000 Up to $255
$37,001 – $48,000 $255 + 7.5% of excess over
$37,000
$48,001 – $90,000 $1,080
$90,001 – $126,000 $1,080 – 3% of excess over
$90,000
$126,001+ Nil

Tax rates

Based on the announced changes,
effective from 2024 – 2025, there would be just three personal income tax rates
– 19%, 30% and 45%.

Tax rates and income thresholds

It’s also proposed the maximum threshold
of the 19% personal income tax bracket be increased from $41,000 to $45,000
effective from 1 July 2022.

Tax rates in 2017-18 Thresholds in 2017-18 New rates in 2024-25 New thresholds in 2024-25
Nil $0
– $18,200
Nil $0
– $18,200
19% $18,201 – 37,000 19% $18,201 – $45,000
32.5% $37,001 – $87,000 30% $45,001 – $200,000
37% $87,001 – $180,000
45% Above $180,000 45% Above $200,000
LITO in 2017-18 Up to $445 LITO in 2024-25 Up to $700

Medicare

An amendment has also been
proposed to the legislation to increase the Medicare levy low income thresholds
for 2018-19.

For singles, this will be
increased from $21,980 to $22,398; for couples with no children the family
income threshold will go from $37,089 to $37,749 with each dependent child or
student increasing from $3,406 to $3,471.

Business Tax Highlights

A sweetener for small and now
medium business owners, is the previous Small Business instant asset write-off
is being extended to apply to medium sized business with turnover up to $50
million, with an increase in the write-off threshold for assets costing less
than $30,000 applicable immediately from budget night 2 April 2019.

Superannuation

The government is proposing an
increase in the age limit to 66 for voluntary super contributions from 1 July
2020, where no work test applies, along with an increase in the age limit to 74
for spouse contributions.  

Div7A Proposed Changes

The proposed amendments to Div7A
that were set to commence on 1 July 2019, have been delayed to 1 July
2020.  The most prominent amendments include, allowing for a maximum  10 year loan agreement with annual repayments
of principal and interest to prevent a deemed dividend arising; transitional
rules to align existing loans into the 10 year loan model, with existing 25
year loans being largely exempt from the new rules until 30 June 2021; and
existing unpaid present entitlements arising between 16 December 2009 and 30
June 2019 will now be brought within the scope of the new rules.

What do you think about the Morrison Government’s budget?
On the money, an election pleaser or profusely underwhelming?