Federal Budget Highlights 2019 – the bits you need to know.
With an election only five weeks away we have two budgets to consider.
The liberals announced the promise of investment in infrastructure, a return to surplus in the 2020 financial year, smaller short-term tax cuts, followed by larger tax cuts in the longer-term.
The Labor party announced investment in healthcare, education, infrastructure, smaller short-term tax cuts, however, rejected the Liberals larger future tax cuts and instead announced it would use excess funds to pay down government debt which includes a return to surplus.
These are two different long-term visions with the Liberal’s aiming for flatter income tax rates and potential cuts to public services and payments, compared with Labor aiming to maintain taxes with greater spending on public services.
LIBERAL ANNOUCEMENTS – in summary
Business Owners
• Instant asset write-off increased to $30,000 until 30 June 2020, for small and medium businesses with a turnover of less than $50 million. Note – this has been legislated and is now available.
• Company tax rate reduction for businesses from the current rate of 27.5% down to 25% from 2021/22. Those with a turnover under $50 million will qualify.
• Further postponement of proposed amendments for Unpaid Present Entitlements being treated as Division 7A loans to July 2020.
Individuals
• Low and Middle Income Earners Tax Offset for 2018/19 to 2021/22 increased up to $1,080 for single earners and $2,160 for couples.
• From 1 July 2024, removing the 37% tax bracket and reducing the 32.5% tax bracket, resulting in those earning between $45,000 and $200,000 paying tax at a 30% rate.
Superannuation
• Voluntary super contributions allowed without meeting the work test for 65 & 66 year-olds from 1 July 2020.
• Spouse contributions age limit will be increased from 69 to 74 years.
• Investment.
• Implementation of the 75 recommendations handed down by the Royal Commission into the Financial Services Sector.
• Black Economy & Regulation:
(a) Continued expansion of programs and investment including $1 billion for the ATO task force
(b) Businesses required to have good history when tendering for large government contracts
(c) Continued implementation of automated payroll reporting system ‘Single Touch Payroll’ for all employers.
Infrastructure
• Increased spending overall including improved rail links, funding increase from $1 billion to $4 billion for the Urban Congestion Fund to improve city travel times and commuter car park funds.
• Bold spending announcements for major projects in capital cities and regional areas.
• $2.2 billion for road improvements, plus $1 billion to improve freight routes and ports access.
Healthcare
• $461 million for youth mental health & suicide prevention.
• Major investment in rural areas in assistance programs and medication that will improve outcomes for those with cancer, heart disease and epilepsy.
Education
• Skills package worth $550 million to create 80,000 new apprenticeships in areas with skills shortages.
• Doubling the incentive payments to employers taking on apprentices to $8,000 and give new apprentices a $2,000 incentive payment.
• Investment in science, technology and research.
LABOR ANNOUNCEMENTS – in summary
Business Owners
• Will retain the Instant asset write off that was recently increased to $30,000 until 30 June 2020, for small businesses Note – this has been legislated and is now available.
• Introduce the Australian Investment Guarantee which allows an immediate 20% deduction for eligible depreciable assets over $20,000. Asset include those that use low energy and improve energy efficiency.
Individuals
• Similar tax cuts as announced by the Liberals for low and middle-income earners. Some additional tax cuts for those earning under $40,000.
• Labor are not removing the 37% tax bracket, instead allocating these funds to other parts of the economy.
• Minimum tax rate of 30% on discretionary trust distributions made to adult beneficiaries from 1 July 2019.
• Removal of refunds for franking/imputation credits. There is an exemption for pension & allowance recipients, and self-manager super funds with at least one member who was receiving a pension or part-pension.
• Limit negative gearing to new housing.
• Proposal to half the current CGT Discount on asset purchased after the introduction date (not yet announced). Effectively reducing the discount to 25%, down from 50%. Grand-fathering will apply to all investments before any introduction date.
Superannuation
• Non-concessional contribution cap to be reduced to $75,000 (currently $100,000).
• Income threshold for the extra 15% contributions tax for high income earners to be lowered to $200,000 p.a. (currently $250,000 p.a.).
• Abolish catch-up concessional contributions.
• Deductibility of personal contributions for employed persons to be removed.
• Committed to low income superannuation tax offset.
• Borrowing by SMSFs to be prohibited.
• Superannuation Guarantee coverage to be expanded to include both parental leave and salary and wages of less than $450 per month.
• Increase in the Superannuation Guarantee rate to 12% ahead of the current timetable “when prudent”.
Investment
• Implementation of the 75 recommendations handed down by the Royal Commission into the Financial Services Sector.
Infrastructure
• Investment in large projects throughout the country, as the Liberal party has done.
• A focus on clean energy and sustainability, with targets such as 50% of vehicle purchases to be electric by 2030.
• Provide Infrastructure Australia with a new $10 billion funding facility.
Healthcare
• $2.3 billion Medicare cancer plan to cover out of pocket medical costs.
Education
• $1 billion increase to vocational training and the TAFE (technical & further education) system aimed at increasing 150,000 new apprenticeships.
• Return funding previously cuts to schools.
My word of advice is to educate yourself and remain informed. It’s only 5 weeks until the Australian Federal Election being held on Saturday 18th May 2019.
Article written by Highview Accounting & Financial’s Partner, Dave Sheahan, CPA.