Federal budget 2018 update & our take on it!

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SuperFunds

Maximum allowable member in a fund is increased from 4 to 6.

From 1 July 2019, audit of superfund can be done once in three years for SMSFs with a history of good record keeping and compliance.

Individuals will be required to confirm in their income tax returns that they have complied with “notice of intent” requirements in relation to their personal superannuation contributions, effective from 1 July 2018.

Insurance arrangements for certain superannuation members will be changed from being a default framework to being offered on an opt-in basis

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.

From 1 July 2018, if an individual’s income exceeds $263,157, and he or she has multiple employers, then he or she can nominate that wages or salary from certain employer are not subject to superannuation guarantee from 1 July 2018.

3% annual cap on passive fees charges by superfunds for account balances below $6000 and exit fees on all superannuation accounts will be banned.

Financial Planning

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 per cent personal income tax bracket.

The concessional tax rates for the income of minors from testamentary trusts will not be available for trust assets unrelated to the deceased estate.

From 1 July 2019, people who own vacant blocks of land will no longer be able to claim tax deductions. This restriction will not apply to any expenses incurred after the construction begins in the vacant block or any land being used by owners to carry out business.

Increase to the Pension Work Bonus from $250 to $300 per fortnight. From July 2019, an increase to the Pension Work Bonus will allow age pensioners to earn up to an extra $50 per fortnight.

The Pensions Loan Scheme will be boosted be enable everyone over pension age to effectively mortgage their home to the government to access fortnightly payments

For Individuals

Threshold of 32.5% tax bracket is increased to $90,000 from 1 July 2018. Top marginal tax rate of 45% for income above $200,000. The 37% tax bracket will be abolished from 1 July 2024 by increasing the upper threshold of the 32.5% personal income tax bracket from $120,000 to $200,000.

The increase of the Medicare levy to 2.5% from 1 July 2019 will not proceed, and the levy will remain at 2% of taxable income.

Supplementary amounts (such as pension supplement, rent assistance and remote area allowance) paid to a veteran, and full payments (including the supplementary component) made to the spouse or partner of a veteran who dies, are exempt from income tax from 1 May 2018.

For the income years of 2018-19 to 2021-22, the Govt will provide non-refundable tax offset of up to $530 per annum to Australian resident low and middle-income taxpayers.

For Companies

The lower tax rate of 27.5% is extended to companies with annual turnover less than $25 million in 2017-18 and $50 million from 1 July 2018.

Small business instant asset write-off of $20,000 further extended to 30 June 2019.

From 1 July 2019, MIT and AMIT will be prevented from applying the 50% capital gains discount at the trust level.

The Government will clarify the operation of Division 7A to ensure that unpaid present entitlements (UPEs) are within the scope of Division 7A. This will now legislate the ATO’s view as previously set out in Taxation Ruling TR 2010/3.

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.

The maximum amount of R & D expenditure eligible for concession towards R & D tax offset will be increased from $100 million to $150 million.

The unincorporated small business tax discount rate increased from 5 per cent to 8% (up to a cap of $1,000). This rate will increase to 16% by 2026‒27.

The luxury car tax on cars re-imported into Australia, following a refurbishment overseas, will be removed from 1 January 2019.

Effective 1 July 2018, employers with 20 or more employees will report payments such as salaries and wages, pay as you go (PAYG) withholding and superannuation information from their payroll solution each time an employee is paid. For employers with less than 20 employee, this will be introduced from 1 July 2019.

For eligible R&D entities with a turnover of $20 million or more, the Government is introducing an R&D premium that ties the rate of non-refundable R&D tax offset to the proportion of R&D expenditure for each year as follows:

R&D premium
(calculated as relevant % plus claimant’s company tax rate)
R&D expenditure as a proportion of total annual expenditure

4%0 to 2%
6.5%>2% to 5%
9%>5% to 10%
12.5%>10%

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