To assist our clients, the Morrows One Team aims to identify some key items that will be of significant interest as they will have an impact on areas such as business operations, personal tax and superannuation, some of which may not be in the headlines.
It is important for our readers to note that the changes in this budget have been proposed by the Liberal party. If the Liberal Party win the election, depending on where the power settles, the proposed changes in the budget may not be legislated in full or even at all. Should the Labor Party win the election, many of the Liberal Party’s proposed legislature may be prevented from passing and funds potentially budgeted in a different manner.
For an in-depth analysis, the following links provide a clear outline of the budget:
Main Initiatives of Interest
Tax Bracket Changes:
As of the 2023-24 financial year, there will be an adjustment to the thresholds for the marginal tax brackets, with the most significant being for those who earn up to $120,000. Additionally, there is a proposed cut in the marginal tax rate from 32.5% to 30% but that will not be implemented until 2025 should it be passed. See below for a summary of the tax bracket changes:
The main change to superannuation is that individuals aged 65 and 66 will now be eligible to make both concessional and non-concessional contributions to super without having to meet a work test. From 1 July 2020, individuals aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the existing bring forward rule.
Whilst there has been some eye-catching coverage about “downsizing”, (regarding the sale of a home to downsize and allowance to make contributions of up to $300,000 per person to super), care needs to be taken when selling/reducing an asset that is not means tested for Government Pension purposes in order to increase one that is (superannuation balances).
The government also announced that people up to and including the age of 74 will be able to receive spouse contributions. Currently those aged 70 and over cannot receive spouse contributions.
Additionally, the government proposed to remove a redundant requirement for Super Funds to obtain an actuarial certificate when calculating Exempt Current Pension Income (ECPI), using the proportionate method, where all members of the fund are fully in the retirement phase for all of the income year. However, this measure is intended to start on 1 July 2020, if legislated.
The Superannuation changes are quite positive, increasing access for some to make additional contributions and reducing compliance costs where actuarial certificates are required.
Single Touch Payroll
Reporting income for Social Security purposes will be done automatically via Single Touch Payroll (STP). While this seems like a small change that will not have a significant impact, the measure is expected to save $2.1 billion over 5 years from 2018-19.
Morrows advises all clients to ensure that the correct training measures are put in place to guarantee that your business meets the new compliance measures under STP. Be aware that STP is a very substantial change for all employers, (not just the larger employers) to cope with.
Export Markets Development Grant (EMDG)
An extra $60 million will be provided to assist current and aspiring small to medium-sized exporters to utilise free trade agreements and seek new offshore opportunities for their goods and services. This has been referred to as the “Google, Instagram and Facebook Grant”, and is an increase to the advertising subsidy.
Any increase in funding for or effectiveness of EMDG is welcomed. Our team is well versed on key aspects of EMDG and other subsidies such as R&D rebates to help guide clients through any queries they may have.
$70 million has been proposed to be distributed over 2 years to increase analytical capabilities via alternate data centre facilities. A further $6.9 million spread over 4 years has been proposed to support additional analytical capabilities within the Treasury and other departments. It shows the ever-increasing march of integrated data continues.
Immediate Write-off for Capital Items
The government has increased the limit to the value of assets can be written-off by small businesses. This means that there are 3 thresholds that you must consider when writing-off a small business’ assets in the financial year of 2019. These are:
- 1 July 2018-28 January 2019: less than 20,000
- 29 January 2019 – before 7:30pm (AEDT) on 2 April 2019: less than $25,000
- From 7:30pm (AEDT) on 2 April 2019: less than $30,000
If you have any questions relating to how the budget changes will affect you or your business, please contact your adviser for more information by calling 03 9690 5700 or set up a meeting to have a friendly discussion.