Our Federal Treasurer, John Frydenberg has handed down his first Budget, and as anticipated, from a pre-election budget it contained tax cuts for individual and tax concessions for small and medium size businesses.

A stronger economy and a secure future were the promise in announcing a A$7.1 billion surplus, tax cuts and extra funding for infrastructure and services to regional Australia in the 2019/20 budget.

Many of the proposed personal income tax cuts build on the Coalition government’s 7-year Personal Income Tax Plan measures announced in last year’s Budget and subsequently legislated in 2018.

The Budget also confirmed a number of recently announced changes to superannuation. These include the removal of work test and expansion of the non-concessional contributions bring forward provision for Australian aged 65 and 66.

This budget made a strong election pitch but “their biggest test is whether Liberal can get re-elected in the coming months to enable them to deliver on these budget commitments.”

WINNERS

Wage and salary earners

The Treasurer announced A$158 billion in personal income tax cuts through more than doubling the low and middle-income tax offset from 2018/19.

This will benefit more than 10 million people earning up to A$126,000 a year.

This will be done by the Government increasing the non-refundable Low and Middle Income Tax Offset (LMITO) for the 2018/19, 2019/20, 2020/21 and 2021/22 financial years. The maximum offset will increase from $530 to $1,080 per annum and the base amount will increase from $200 to $255 per annum. The LMITO will be received in 13 weeks’ time as a lump sum when individuals lodge their income tax return from 1st July 2019.

From July 2024, Frydenberg says the government will cut the 32.5 per cent marginal tax rate to 30 per cent, applying to all taxpayers earning between A$45,000 and A$200,000. With these changes, by 2024/25, around 94% of Australian taxpayers are projected to face a marginal tax rate of 30% or less.

Business

The instant asset write-off will be extended to June 2020 and increased from A$25,000 to A$30,000. The write-off allows small business with a turnover of less than A$10 million to claim an immediate deduction for a purchase below that amount but will be expanded to businesses with turnover of up to A$50 million, or another 22,000 businesses.

Businesses will also be able to claim the deduction every time they make a purchase under the cap.

Building and transport industries

The government announced increased investment in infrastructure spending, to improve rail links and address road black spots, with the Treasurer naming several projects in major state capital cities and also rural and regional Australia.

The budget includes increasing the Urban Congestion Fund to A$4 billion from A $1 billion, to cut travel times in Australia’s rapidly-growing cities.

A A$500 million Commuter Car Park Fund would improve access to public transport hubs.

He promised A$2.2 billion for roads, A$1 billion to improve freight routes and access to ports and A$100 million for regional airports.

Education

A A$525 million skills package would create 80,000 new apprenticeships in industries with skills shortages and double to A$8,000 the incentive payments to employers per apprenticeship placement.

There were also announcements to create new training hubs, give new apprentices a A$2000 incentive payment, and invest in science, technology and research.

Rural areas

The budget papers commit to major spending in regional and rural areas to expand water infrastructure, provide drought relief and upgrade regional airports.

Older Australians

Frydenberg announced A$725 million for aged care, with 10,000 new home care packages and capital works focused on regional Australia.

Single pensioners will get a A$75 one-off cash payment for their energy bills, while couple pensioners will get A$125.

Health sector

Australians suffering from cancer, heart disease, epilepsy and who live in rural areas are likely to benefit from several major investments in assistance programs and medication. The budget also contains A$461 million for youth mental health and suicide prevention.

Superannuation industry and older Australians

People approaching retirement will be able to boost their superannuation balances, with those aged 65 and 66 years able to make voluntary contributions without satisfying the work test, from July 1, 2020. Currently, people aged 65 and older must work a minimum 40 hours over a 30-day period.

Frydenberg said the measure will align the work test with the eligibility age for the Age Pension, due to rise to 67 years from July 1, 2023. About 55,000 people will benefit from the reform.

People aged 65 and 66 will also be able to access the “bring forward arrangements” to make three years’ worth of non-concessional contributions (capped at A$100,000) to their super in a single year. This currently stops at 65 years.

The age limit for spouse contributions will be increased from 69 years to 74 years.

LOSERS

Business

There were a few measures for corporate Australia, although many of the largest companies would benefit from spending in infrastructure, either as providers or users of improved services.

Regulatory burden on business

Business will pay more fees to regulators, through the industry funding model for the Australian Securities and Investments Commission (ASIC) and higher levies to the Australian Prudential Regulation Authority (APRA).

As part of a response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, there will be extra funding to ASIC of A$38.5 million in 2019/20 and A$118 million in 2020/21, possibly funded by extra fees to business.

APRA will get A$16.9 million and A$19 million over the same period.

The budget allocates the Australian Taxation Office an extra A$1 billion over four years to expand its Tax Avoidance Taskforce.

Tax integrity and black economy

Australian Business Number (ABN) holders will be required to lodge their income tax return and confirm the accuracy of their details on the Australian Business Register annually to retain their ABN status.

The start date of amendments to Div 7A will be delayed by 12 months to 1 July 2020.

The ATO’s Tax Avoidance Taskforce will extend its operations and expand its activities, including increasing its scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes.

The ATO will receive funding to increase activities to recover unpaid tax and superannuation liabilities with a focus on large businesses and high wealth individuals.

A dedicated sham contracting unit will be established within the Fair Work Ombudsman to address sham contracting behaviour by some employers.

Savers

The government has not introduced measures that would encourage Australians to save outside the superannuation regime.

Sport Integrity 

The Government will establish a new body, Sport Integrity Australia, to carry out anti-doping and integrity functions, and a National Sports Tribunal to hear and resolve rule violations. The Government has also signed up to the Council of Europe Convention on the Manipulation of Sports Competitions.

Conclusion

It is important to note the Budget announcements are still only proposed at this stage and to be legislated. The Coalition will need to win the Federal election next month and have the support of crossbench Senators. Changes can also be made prior to these proposals becoming law.

Sources

CPA Update (03.04.2019)
Australian Unity (03.04.2019)
Sources. Accurium (03.04.2019)