The Federal Budget was delivered on 2 April 2019. With a federal election around the corner and with a budget surplus, the budget was predominantly focussed on individual tax cuts with limited tax reform announcements.
One thing to remember is that with a pending federal election and with the implementation date of some of the tax cuts still years away, there is no certainty that the Federal Budget announcements will ever get legislated. At this stage, the announcements should be considered as proposals only.
The Government is proposing to increase the rate of the Low to Middle Income Tax Offset (LMITO) from $530 to a maximum rate of $1,080 for the years ended 30 June 2019 to 30 June 2022. Those taxpayers on taxable income between $48,000 and $90,000 will receive the maximum benefit of the revised LMITO.
In addition to the above, a range of tax rate cuts has been proposed to commence from the 2023 financial year through to the 2025 financial year.
Both of the above announcements will be subject to new legislation being passed after the federal election.
Previously announced changes to deny non-residents of Australia being able to apply CGT main residence exemption appear to have been removed from the agenda and the draft legislation the Government introduced to enact the changes will lapse upon the federal election being announced.
The current application of the Small Business Instant Asset writeoff (i.e. an immediate deduction for asset purchases of less than $25,000 made by businesses with a turnover of less than S10M) will be revised by increasing the maximum eligible threshold from $25,000 to $30,000. Furthermore, the Government has extended the instant asset write-off to medium size businesses who have a turnover between $10M-$50M. These measures are proposed to apply to assets purchased from 2 April 2019 to 30 June 2020.
The above announcement will be subject to new legislation being enacted.
Previously announced proposals to amend Division 7A (loans from private companies to shareholders/associates) have been deferred until 1 July 2020.
ATO compliance activity
With ever increasing data matching available to the ATO, the ATO is having higher rates of success on collecting tax shortfalls from their targeted audit activity. To this end, the Government has announced increased funding to various ATO taskforces. All taxpayers need to be aware of the ever-increasing information the ATO is using to cross-check information disclosed in income tax returns lodged.