2019 Federal Budget

We've cut through the noise to deliver the key things you need to know

This was a nervous maiden and pre-election budget delivered by Treasurer Josh Frydenberg whose delivery of the budget to his colleagues in the lower house resembled a last minute fill-in for the Year 8 debating team. Despite the usual cliche, hyperbole and perhaps even poetry, it was largely devoid of any major new policy announcements in an attempted 'safe' play to help the Coalition claw their way back before the election.

In positive signs for Scott Morrison and Josh Frydenberg, the Labour party odds have 'blown out' to $1.20 on the TAB this morning - odds that only Winx that would be proud of!

The treasurer announced that Australia's budget is 'back in the black and Australia is back on track'. Whilst the big news is that the budget forecasts a return to surplus of $ 7.1bn next financial year, the battle lines were drawn for the looming election and taxation appears to be a key policy item for the Coalition.

The Coalition handed down a pre-election budget promising $158 billion of personal income tax cuts over a decade, including tax relief for low and middle-income earners that will swell the hip pocket. The other main items consisted of a small business tax concession and $100bn of infrastructure spending aimed at easing congestion in cities, in addition to more funding for the ATO taskforces and data analytics measures to address tax evasion.

Other than the tax changes and infrastructure spend announcements, there were not a lot of other significant policy announcements.

Don't hold your breath however, as there are still approximately 25 tax related bills in front of our trusted representatives in Canberra that require passing into legislation prior to Scott Morrison's impending visit to the GG's office to request a return to the polls. That visit is expected to take place this weekend, calling for the election to be held on either Saturday 11th or 18th May 2019.

BUDGET 2019-20
Key Points for Small Business: 

• Personal tax cuts: Immediate major low-mid tax offset increase, other rate changes from 2022 to result in only 3 rates by 2024-25

• Instant asset write-off extended to more taxpayers, increased from $25,000 to $30,000

• Proposed changes to Div 7A arrangements deferred 12 months to 1 July 2020

• EMDG scheme - extra $60 million in funding

• Skills package – new apprenticeships, incentive payment, training

• Increasing the base visa application charge (VAC) for all visa subclasses, with the exception of the Visitor (subclass 600) visa, by 5.4% from 1 July 2019

• Tax exemption for North Queensland floods grants and primary producers affected by Queensland storms

• $70m of funding designed to increase the ATO's analytical capabilities

What was missing?

• Removal of CGT main residence exemption for foreign residents - still in limbo

• No GST measures in 2019-20 Federal Budget

• Calls for abolition of Luxury Car Tax ignored in the Budget

Personal Income Tax Cuts

As anticipated, the Budget celebrated the surplus with a $19.5bn package of personal income tax cuts for Australian residents. This package revises the legislated seven year income tax plan.
 
The personal tax changes mean a tax saving of $855 for someone on an annual taxable income of $45,000 per annum until 2022, then $1,080 until 2024 onwards (check the tax relief calculator).

This round of tax cuts:

• Increases the top threshold of the 19% personal income tax bracket to $45,000 from 1 July 2022

• Reduces the 32.5% marginal tax rate to 30% from 1 July 2024-25

Instant Asset Write-Off Increased to $30K and Expanded to Businesses Under $50m

The threshold for the popular $20,000 instant asset write-off will increase to $30,000* from Budget night until 30 June 2020 when it will potentially return to its original $1,000 level on 1 July 2020. We say ‘potentially’ because the threshold has been at or above $20,000 since 12 May 2015.

The Government had previously announced an increase to the threshold for the instant asset write-off to $25,000 from 29 January 2019 but this measure was not legislated prior to the release of the Budget. The Government however intends to honour the announced rate increase.

In addition, the number of businesses that can access the instant asset write-off will increase. Currently, to qualify for the write-off, only businesses with an aggregated turnover under $10 million qualify. From Budget night, businesses with an aggregated turnover under $50 million will also be able to access the write-off.


Proposed changes to Div 7A arrangements deferred 12 months to 1 July 2020

Division 7A captures situations where shareholders access company profits in the form of loans, payments or the forgiveness of debts. The rules are drafted broadly and have become more complex as amendments close perceived loopholes.

Division 7A treats certain events as triggering “deemed” dividends for tax purposes. Where a private company makes a payment or loan to a shareholder or associate, the amount may be treated as a dividend for tax purposes. Where a debt owed by a shareholder or associate to a private company is forgiven, these amounts may be subject to the same treatment.

Significant changes to the way Division 7A works were intended start taking effect from 1 July 2019.  These reforms have now been pushed back to 1 July 2020.


EMDG scheme - extra $60 million in funding

$61m over three years has been provided to support Australian businesses to export Australian goods and services to overseas markets. $60m of the funding will go towards boosting reimbursement levels of eligible export marketing expenditure for small and medium enterprise exporters.


Skills package – new apprenticeships, incentive payment, training

The Budget announced a new $525 million skills package. It seeks to create 80,000 new apprenticeships over 5 years in industries with skills shortages. The Government will double incentive payments to employers to $8,000 per placement. These new apprentices will also receive a $2,000 incentive payment.


Increasing the base visa application charge (VAC) for all visa subclasses, with the exception of the Visitor (subclass 600) visa, by 5.4% from 1 July 2019

The Government announced that it is increasing the base visa application charge (VAC) for all visa subclasses, with the exception of the Visitor (subclass 600) visa, by 5.4% from 1 July 2019. There will be no increase to second instalment VACs. This measure is estimated to increase revenue by $275 million over the period from 2018-19 to 2021-22


Tax exemption for North Queensland floods grants and primary producers affected by Queensland storms

The Government will ensure that qualifying grants paid to primary producers, small businesses and non-profit organisations affected by the North Queensland floods will be treated as non-assessable non-exempt income, which means that they should be tax-free.

Qualifying grants include Category C and Category D grants provided under the Disaster Recovery Funding Arrangements 2018, and grants provided under the On-Farm Restocking and Replanting Grants Program and the On-Farm Infrastructure Grants Program.


$70m of funding designed to increase the ATO's analytical capabilities

The Government will provide funding designed to increase the ATO's analytical capabilities. First, the Government will provide $70 million over 2 years from 2018-19 to undertake preparatory work required for the ATO to migrate from its existing data centre provider to what is termed in the Budget papers as an "alternative data centre facility".

The funding will also be used to prepare a second pass business case that will identify the full cost of activities required to complete the data centre migration project. The Government will also provide $6.9 million over 4 years from 2019-20 to support additional analytical capabilities within the Treasury and other agencies

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