Every first Tuesday in May, I make sure I spend time to listen to the budget changes that the government announces. This year I didn't bother! The changes bring nothing but an election sweetener and more compliance for small business. Nothing exciting about that! 

Here are the changes that you will need to know about whether you are working for someone, you work for yourself and/or you have a self managed super fund:

Don't start dancing for a mere $200-$530 tax offset!

This new offset for Low & Middle Income earners will be introduced from the 2019 financial year as follows:

  • Taxpayers with taxable incomes of $37,000 or less will receive a benefit of up to $200.
  • Taxpayers with taxable incomes between $37,000 and $48,000, the value of the offset will increase at a rate of three cents per dollar to the maximum benefit of $530.
  • Taxpayers with taxable incomes from $48,000 to $90,000 a $530 offset applies
  • Taxpayers with taxable incomes from $90,001 to $125,333, the $530 offset will phase out at a rate of 1.5 cents per dollar over $90,000.

 
Yes the personal income tax changes will save you 4 tanks of petrol!

From the 2019 financial year, the Government have proposed the following changes to the income tax brackets:  
Tax Rate       2018 Tax Bracket              2019 Tax Bracket (Proposed)
32.5%            $37,001 – $87,000             $37,001 – $90,000
37%                $87,001 – $180,000          $90,001 – $180,000
 
Changes to Medicare Levy
The medicare levy will not increase to 2.5% as previously announced. it will stay at 2%. Hooray! From the 2018 financial year, the Medicare levy for low-income thresholds will increase from $21,655 to $21,980. The family threshold for will be increased from $36,541 to $37,089


Business Income Tax Changes 
The $20,000 Immediate write-off for small business (with aggregated annual turnover less than $10 million) will continue till 30th June 2019. 
 
Removing tax deductibility of payments where withholding obligations have been disregarded
From the 2020 financial year, businesses will no longer be able to claim a deduction for the payments to employees and contractors where they have not withheld any amount of PAYG from these payments when PAYG withholding requirements apply. It's important that you tax your employees and contractors correctly. Failure to withhold the correct tax will result in not being able to claim those expenses. 
 
Introduction of an economy-wide cash payment limit
From the 2020 financial year, there will be a limit of $10,000 for cash payments made to businesses for goods and services. This means any payments over $10,000 to businesses for goods & services have to be made via electronic payment system or cheque.  

Expanding the contractor payment reporting system
From the 2020 financial year, the Government will expand contractor payment reporting system, which currently are required for the building and construction industry, to include the following industries:

  • security providers and investigation services;
  • road freight transport; and
  • computer system design and related services.

The first annual reporting for these industries will be due in August 2020 and we will offer a service to have these lodged on your behalf.    

 
Superannuation Income Tax Changes
 
Exemption from the work test for voluntary contributions
From the 2020 financial year, there will be an exemption from the work test for voluntary contributions to superannuation, for people aged 65-74 with superannuation balances below $300,000 in the first year that they do not meet the work test requirements. This means retirees are able to make voluntary contributions for at least one year without working a minimum of 40 hours in any 30 day period in the financial year.  

Three-yearly audit cycle for some SMSF's
From the 2020 financial year, the Government will change the annual audit requirement to a three-yearly requirement for SMSFs with a history of good record-keeping and compliance. If the SMSF has a history of three consecutive years of clear audit reports and have lodged the fund’s annual returns on time, the annual reports will only have to audited by an approved SMSF auditor every 3 years. For our SMSF trustee clients, make sure you do the right thing to earn this qualification. It will save you hundreds to dollars of auditors fee.   

Increasing the maximum number of allowable members in an SMSF
The maximum current number of members in a self managed super fund is four. The government wants to increase the number to six.  

Preventing inadvertent concessional cap breaches by certain employees
From the 2019 financial year, the Government will allow employees whose income exceeds $263,157 and working for multiple employers, to nominate that their wages from certain employers to not be subject to the superannuation guarantee (SG). This will help avoid unintentionally breaching the $25,000 annual concessional contributions cap as a result of multiple compulsory SG contributions.  

Increased ATO Compliance Activities
The Government will provide $130.8 million to the ATO from 1 July 2018 to increase compliance activities targeting individual taxpayers and their tax agents by maintaining the ATO income matching programs and funding for new compliance activities including additional audits and prosecutions.  

We offer audit insurance annually to cover any costs associated with these ATO audits and we do recommend you get covered as the audit process can be costly if you are unlucky enough to be targeted.

Budget 2018 - indeed much ado about nothing!  Happy EOFY.