Which Update in the 2018 Federal Budget Affects You?
The $20,000 Immediate Write-Off for Small Business is Extended
The Government will extend the $20,000 immediate write-off for small business to 30 June 2019 for businesses with aggregated annual turnover less than $10 million. So, small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019. Only a few assets are not eligible (such as horticultural plants and in-house software).
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to qualify for the simplified depreciation pool -- depreciated at 15% in the first income year and 30% each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).
No Withholding Payments - No Tax Deduction
From 1 July 2019, businesses will no longer be able to claim a tax deduction for:
• Payments to their employees such as wages where they have not withheld any amount of PAYG from these payments (despite the fact the PAYG withholding requirements apply).
• Payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (despite the withholding requirements applying).
Other Business Changes
Under the contractor payment reporting system, businesses are required to report payments to some external contractors to the ATO. In addition to building & construction, cleaning and courier sectors, the Government has announced it will further expand the contractor payment reporting system to the following industries:
- security providers and investigation services;
- road freight transport; and
- computer system design and related services.
Personal Tax Changes
Another change that might affect you personally is from 1 July 2018, the Government will increase the topmost threshold of the 32.5% personal income tax bracket from $87,000 to $90,000. The Medicare Levy is no longer changing, and will stay at 2% of income.
Future proposed changes in July 2022 include extending the top threshold of the 32.5% personal income tax bracket from $90,000 to $120,000. But as we all know, a change of Government may well overturn future-dated decisions.
The Government are working to reunite people with their lost Super. Accounts under $6,000 will be effected, from 1 July 2019, the Government will introduce a 3% annual cap on passive fees charged by superannuation funds on accounts. Government will ban exit fees on all superannuation accounts.
The new rules for SMSFs from 1 July 2019 allow a maximum of six (6) rather than four members in a SMSF, which is good news for the joint management of retirement savings in large, working or retired families.
If you have a question about the new May 2018 Budget Changes, or general tax planning, please contact one of our friendly Accountants at Team Accounting today.