INDIVIDUAL TAX RELIEF VIA INCREASED LMITO What is the proposed measure?  The previously proposed (and legislated) low and middle income tax offset (LMITO) will now be increased from a maximum amount of $530 to $1,080 a year for singles and the base amount will increase from $200 to $255 a year for the 2018-19, 2019-20, 2020-21 and 2021-22 income years. As a result, the LMITO will now provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less. For taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of 7.5 cents per dollar to the maximum offset of $1,080. As a result, taxpayers with taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1,080. For taxable incomes between $90,000 to $126,000 the offset will phase out at a rate of 3 cents per dollar. The LMITO will be received on assessment after individuals lodge their tax returns for the relevant  income years. Who will it affect?  All individuals taxpayers When will it apply?  The 2018-19 to 2021-22 income years (inclusive) Comment: From 1 July 2018, individual tax relief or tax reduction will be effected by an increase in the LMITO (which was previously introduced and legislated following the 2018-19 Budget) and not by the anticipated changes in tax thresholds and/or marginal tax rates. FUTURE CHANGES IN TAX THRESHOLDS AND RATES What is the proposed measure?  Reductions in individual thresholds and/or marginal tax rates will apply in future income years as follows: From 1 July 2022, the top threshold of the 19% personal income tax bracket will be increased from the previously legislated $41,000 to $45,000. From 1 July 2022, the Government will increase the low income tax offset (LITO) from $645 to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000, instead of at 6.5 cents per dollar between taxable incomes of $37,000 and $41,000 (as previously legislated). LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667. (Note that following these changes the proposed LMITO relief will be removed.) From 1 July 2024-25, the 32.5% marginal tax rate will be reduced to 30%. Further, in 2024-25 the entire 37% tax bracket will be abolished. Who will it affect?  All individuals taxpayers When will it apply?  The 2022-23 to 2024-25 income years (inclusive) Comment: As a result of these proposed changes, the government states that by 2024-25 around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less. MEDICARE LEVY LOW-INCOME THRESHOLDS INCREASED What is the proposed measure? The Medicare levy low-income thresholds for singles and families, as well as seniors and pensioners, has been increased from the 2018-19 income year as follows: • for singles, the threshold will be increased from $21,980 to $22,398; • for families, the threshold will be increased from $37,089 to $37,794; • for single seniors and pensioners, the threshold will be increased from $34,758 to $35,418; • the family threshold for seniors and pensioners will be increased from $48,385 to $49,304. Note also that for each dependent child or student, the family income thresholds increase by a further $3,471, instead of the previous amount of $3,406.  Who will it affect? Singles, families, and seniors and pensioners When will it apply? From the 2018-19 income year   INSTANT ASSET WRITE OFF INCREASED AND EXPANDED What is the proposed measure? The instant asset write-off threshold will be increased from $25,000 to $30,000 from Budget night to 30 June 2020. The threshold applies on a per asset basis. As a result, eligible businesses can instantly write off multiple assets costing less than $30,000 that are first used, or installed ready for use, from Budget night to 30 June 2020. The instant asset write off will also be expanded to apply to both “small businesses” (those with an aggregated annual turnover of less than $10 million) and medium sized businesses (an aggregated annual turnover of $10 million or more, but less than $50 million). Continuation of pooling arrangements for other assets Small businesses can continue to place assets which cannot be immediately deducted into the small business simplified depreciation pool (the pool) and depreciate those assets at 15% in the first income year and 30% each income year thereafter. The pool balance can also be immediately deducted if it is less than the applicable instant asset write-off threshold at the end of the income year (including existing pools). The current “lock out” laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out) will continue to be suspended until 30 June 2020. Medium sized businesses do not have access to the small business pooling rules and will instead continue to depreciate assets costing $30,000 or more (which cannot be immediately deducted) in accordance with the existing depreciating asset provisions of the tax law. Who will it affect?  Business taxpayers with turnover of less than $50 million When will it apply?  Budget night 2 April 2019 (7:30pm) to 30 June 2020 Comment: Small businesses will still be able to immediately deduct purchases of eligible assets costing less than $25,000 that are first used or installed ready for use over the period from 29 January 2019 until Budget night (under the increase in the instant asset write-off threshold from $20,000 to $25,000 announced on 29 January 2019). ABN OBLIGATIONS AND BLACK ECONOMY What is the proposed measure? ​​The Government will make changes to the Australian Business Number (ABN) system to “disrupt black economy” behaviour by requiring ABN holders: • from 1 July 2021, with an income tax return obligation, to lodge their income tax return; and • from 1 July 2022, to confirm the accuracy of their details on the Australian Business Register annually. According to the government, these … Continue reading FEDERAL BUDGET 2019 – EXCLUSIVE INSIGHTS AND REPORTS