In this Sky Update, we bring you all the latest tax news along with some other items that may pique your interest.
Key 2018 Budget Announcements
Personal tax cuts
The Government is proposing a 7 year 3 step plan to reform personal income tax:
Step 1: A new non-refundable Low and Middle Income Tax Offset from 2018-19 to 2021-22 to provide tax relief of up to $530 per year.
The Low and Middle Income Tax Offset will provide a benefit of up to $200 for taxpayers with taxable income of $37,000 or less.
Between $37,000 and $48,000, the value of the offset will increase at a rate of 3 cents per dollar to the maximum benefit of $530.
Taxpayers with taxable incomes from $48,000 to $90,000 will be eligible for the maximum benefit of $530.
From $90,001 to $125,333, the offset will phase out at a rate of 1.5 cents per dollar.
Step 2: Increase the top threshold of the 32.5% tax bracket from $87,000 to $90,000 from 1 July 2018.
In 2022-23, the top threshold of the 19% bracket will increase from $37,000 to $41,000 and the Low Income Tax Offset (LITO) will increase from $445 to $645.
The increased LITO will be withdrawn at a rate of 6.5 cents per dollar between incomes of $37,000 and $41,000, and at a rate of 1.5 cents per dollar between incomes of $41,000 and $66,667.
The top threshold of the 32.5% bracket will increase from $90,000 to $120,000 from 1 July 2022.
Step 3: From 1 July 2024, the top threshold of the 32.5% bracket will increase from $120,000 to $200,000, removing the 37% tax bracket completely. Taxpayers will pay the top marginal tax rate of 45% from taxable incomes exceeding $200,000 and the 32.5% tax bracket will apply to taxable incomes of $41,001 to $200,000.
The following table reflects the Government’s announced personal tax rate and threshold changes, excluding the 2% Medicare levy:
|Rate||2018-19 to 2021-22||2022-23 and 2023-24||2024-25 onwards|
|0%||$0 – $18,200||$0 – $18,200||$0 – $18,200|
|19%||$18,201 – $37,000||$18,201 – $41,000||$18,201 – $41,000|
|32.5%||$37,001 – $90,000||$41,001 – $120,000||$41,001 – $200,000|
|37%||$90,001 – $180,000||$120,001 – $180,000||N/A|
There is a tax relief calculator on the budget website which you can use to work out how much you stand to benefit from the changes.
$20k instant asset write off extended for 12 months
The $20,000 instant asset write-off will be extended for another 12 months for businesses with an aggregated turnover of $10,000,000 or less so it will expire on 30 June 2019.
R&D incentive overhaul
The Government will amend the research and development (R&D) tax incentive in response to the recommendations of the 2016 Review of the R&D Tax Incentive. The changes will apply for income years starting on or after 1 July 2018.
For companies with aggregated annual turnover of $20 million or more, the Government will introduce an R&D premium that ties the rates of the non-refundable R&D tax offset to the incremental intensity of R&D expenditure as a proportion of total expenditure for the year.
The R&D expenditure threshold, the maximum amount of R&D expenditure eligible for concessional R&D tax offsets, will be increased from $100 million to $150 million per annum.
For companies with aggregated annual turnover below $20 million, the refundable R&D offset will be a premium of 13.5 percentage points above a claimant’s company tax rate. Cash refunds from the refundable R&D tax offset will be capped at $4 million per annum.
R&D tax offsets that cannot be refunded will be carried forward as non-refundable tax offsets to future income years.
Reportable payments system extended to additional industries
The Government is extending the taxable payments reporting system to security providers, investigation services, road freight transport, computer system design and related services.
The reporting requirements will apply starting 1 July 2019 with the first annual report required in August 2020.
SMSF member limit increase from 4 to 6 people
The maximum number of allowable members in new and existing SMSFs and small APRA funds will be expanded from 4 to 6 members starting 1 July 2019.
This measure seeks to provide greater flexibility for larger families to manage their retirement savings jointly and ensure SMSFs remain a compelling retirement savings vehicle.
Community Clubs Victoria Awards
Community Clubs Victoria Awards recognise the high performing individuals and clubs whose efforts contribute to the social and economic well-being of their local communities.
Click on the link for a full list of the awards and winners.
The end of financial year is coming and if you haven’t done so already, it’s time to start thinking about tax planning.
First and foremost, you should be seeking to understand your likely tax position so that you can plan for any tax payments and/or determine if you need to vary your PAYG instalment obligations.
The next step is to then look at what opportunities there may be to achieve a better tax outcome.
If you need help with your tax planning, do not hesitate to contact us.
IGT Review of ATO Debt Recovery Actions
Following on from the sensational allegations made in the media recently, the Inspector General of Taxation (IGT) Ali Noroozi has launched a review of the ATO’s debt recovery actions.
The investigation will focus on the ATO’s strategies to manage tax debts through garnishee notices, policies and procedures for issuing garnishee notices and how the ATO considers taxpayer circumstances to ensure staff adherence to its policies and procedures.
For details of the review and terms of reference, please check out the IGT website.
ATO scrutiny of car claims this tax time
The ATO has announced that it will be closely examining claims for work-related car expenses this year.
About $8.8 billion worth of work-related car expenses were claimed in 2016-17 and the ATO wants to make sure that people are not over-claiming.
For more information on the rules for claiming car deductions please see the guidance on the ATO website.
And as always, feel free to contact us if you need to clarify why you can and can’t claim.
Wake up call to hospitality industry on employer obligations
There has been yet another case of serious non-compliance in the hospitality industry resulting in a burger bar operator being hit with penalties of over $300,000.
According to the Fair Work Ombudsman, restaurants, cafes and takeaway food outlets accounted for 29% of the FWO litigations in 2015 to 2017.
The commentary in the Fair Work Ombudsman (FWO) press release flags a clear focus on stamping out non-compliance in the hospitality industry.
With the increased FWO scrutiny, hospitality & tourism operators should be reviewing their arrangements to ensure that they are compliant.
If you need help, please get in touch.
Accountants Ballarat Office
Phone: 1300 328 855
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Fax: 03 97447004
Office Address: Suite 13, Building B, Sunbury Corporate Centre, 33-35 Macedon Street, SUNBURY VIC 3429
Postal Address: PO Box 222 Sunbury, Victoria 3429