Budget 2018 – Winners and Losers

10 May Budget 2018 – Winners and Losers

budget 2018
Wage earners
Morrison’s tax strategy combines tax relief for low and middle-income earners, protection from bracket creep and making the personal tax system simpler.
From 1 July 2018, the top threshold of the 32.5 per cent tax bracket will rise from A$87,000 to A$90,000 which will prevent about 200,000 people from entering the 37 per cent tax bracket in 2018/19.
A new, non-refundable tax offset, in addition to the Low Income Tax Offset (LITO), will provide tax relief of up to A$530 to low and middle – income earners from 2018/19.  The offset will be received as a lump sum on assessment after individuals lodge their tax returns.
The benefits provided by the low income tax offset (LITO) will be locked in by increasing the top threshold of the 19 per cent bracket from A$37,000 to A$41,000 and increasing the LITO from A$445 to A$645.
Wage earners will also benefit from deferral of plans to increase the Medicare levy, currently 2 per cent of taxable income, by 0.5 per cent, as proposed in the 2017 budget but not legislated. The move was first raised in 2012.
Entrepreneurs/small business
The Treasurer announced an extension of the A$20,000 instant asset write – off for another year, allowing businesses with turnover of up to A$10 million a year to claim an immediate deduction for a purchase of below A$20,000.
The budget contains measures aimed at keeping an ageing population at work
All employers
A raft of measures directed at older Australians will provide wage subsidies of up to $10,000 for employers who take them on.  Morrison said the government will expand the Entrepreneurship Facilitators program, and create a new Skills and Training Incentive to provide mature age workers with the opportunity to update their skills.
Older Australians
The government is launching a scheme to help older Australians and the wave of baby boomers moving into retirement to draw on equity in their home in order to fund their retirement.  The Federal Pension Loan Scheme makes non-taxable loans, paid fortnightly up to the amount of the age pension. It will be extended to full rate pensioners and self-funded retirees, so they can boost their retirement income by up to $17,800 for a couple, without impacting on their eligibility for the pension or other benefits.  The Pensioner Work Bonus will be extended to encourage older people to stay in the workforce, so pensioners can earn an extra A$1300 annually within reducing their age pension payment. Self-employed individuals will be able to earn up to A$7800 a year.
In-home funding will be increased, with 20,000 extra care packages to help people stay in their homes rather than move into aged care.
Infrastructure spending boom continues
Construction and engineering
The infrastructure spending boom continues with engineering and construction firms to benefit from major projects around the country.
A new A$1 billion Urban Congestion Fund will address “pinch points” to improve traffic flows in cities and a A$3.5 billion Roads of Strategic Importance
initiative will upgrade key freight routes, adding to other previously – announced airport links and motorway upgrades.
The medical sector will benefit from a new medical industry plan with support for research and drug trials.
There will be increased funding for mental health services and for doctors and nurses in regional and remote Australia.
Superannuation fund members
Changes include increasing the possible number of self-managed super fund (SMSF) members from four to six, caps on passive fees on small balance super funds, banning super fund exit fees, and changing the work test for those 65-74 years of age who make voluntary contributions to super.

The government will stop super funds from forcing people aged under 25 with low balances to pay for life insurance policies they did not ask for or need.    The government also announced a three-year audit cycle for SMSFs.

The black economy
In the context of the government’s response to the black economy taskforce review, there will be new compliance obligations for some businesses by further extending the TPRS (Taxable Payments Reporting System) to security and investigation services, road freight transport and computer design and related services.
There will be a A$10,000 limit on cash payments across the economy, to reduce money laundering and tax evasion.
Employers and contractors who do not meet withholding obligations will be denied tax deductions.
Morrison says the measures will bring in A$5.3 billion over the next four years.
Phoenixing activities
Tougher rules for illegal phoenixing activities are proposed, including increased liabilities for directors.
The Australian Taxation Office (ATO) will receive additional funding to ramp up its debt collection activities – for both tax and super liabilities.
Businesses using the research and development tax concession
There are potential losers from a crackdown on businesses using the concession, as the government forecasts savings of A$2 billion over four years by tightening access to the incentive.
Large businesses
At the top end of town there are changes regarding taxation of financial arrangements (TOFA), and extended definition of significant global entity (SGE) as well as changes to tax consolidation rules.   Changes to the thin capitalisation rules will ensure tax values are in accord with accounting financial reports also.  There are also changes proposed to remove access to CGT discount by managed investment trusts (MITs).

The Treasurer will release a discussion paper in a few weeks on how digital businesses should be taxed.

Forsythes Business and Financial Advisors
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