2018 BUDGET REPORT SUMMARY

2018 BUDGET REPORT SUMMARY

Treasurer Scott Morrison handed down the 2018-19 Federal Budget on 8 May 2018. Below we list the key changes:

PERSONAL TAXATION

Personal tax rates

• The Government is proposing a major 7 year, 3-step plan to reform personal income tax:

Step 1: A low and middle income tax offset to be introduced as a non-refundable tax offset of up to $530 p.a.

Step 2: From 1 July 2018, the top threshold of the 32.5% tax bracket will be increased from $87,000 to $90,000. From 1 July 2022, the 19% tax bracket will be increased from $37,000 to $41,000 and the top threshold of the 32.5% tax bracket will be further increased from $90,000 to $120,000.

Step 3: From 1 July 2024, the top threshold of the 32.5% tax bracket will be increased from $120,000 to $200,000. Taxpayers will pay the top marginal tax rate of 45% for taxable incomes exceeding $200,000, and the 32.5% tax bracket will apply to taxable incomes of $41,001 to $200,000. This is illustrated in the table below.

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   

45%          $180,001+                       $180,001+                         $200,001+

Medicare Levy

• The Medicare levy will remain at 2%.

BUSINESS TAXATION

$20,000 immediate asset write-off extended

• Businesses with an aggregated turnover of less than $10m will continue to have access to the $20,000 instant asset write-off for another 12 months, to 30 June 2019.

R&D tax incentive changes

• The calculation for entities claiming the R&D tax incentive will change commencing for income years beginning on or after 1 July 2018. Also, a maximum cash refund for “smaller” R&D claimants will be capped at $4m per financial year.

Non-compliant payments to employees and contractors no longer deductible

• Businesses will no longer be able to claim deductions for payments to their employees where they have not met their PAYG obligations. This includes where the employer is required to withhold PAYG from gross payments, but fails to report or remit it to the ATO.

Corporate tax rate

• The government remains committed to extending the 27.5% corporate tax rate to all corporate entities by 2023/24 and to reducing it to 25% by 2026/27 for all corporate entities.

SUPERANNUATION

SMSF member limit to increase from 4 to 6

• The maximum number of allowable members in new and existing self-managed superannuation funds (SMSFs) and small APRA funds will be expanded from 4 to 6 members from 1 July 2019.

Super work test exemption for recent retirees

• An exemption from the work test for voluntary contributions to superannuation will be introduced from 1 July 2019 for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements.

Super Guarantee opt-out for high-income employees who breach concessional cap

• . The Government will allow individuals whose income exceeds $263,157 and have multiple employers to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG) from 1 July 2018.

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