1. Tax rates and thresholds The income tax rates for resident individuals for the next 4 financial years is as follows:
Rate 2018-19 to 2021-22
0% $0 – $18,200
19% $18,201 – 37,000
32.5% $37,001 – 90,000
37% $90,001 – $180,000
The Government proposes a radical rewriting of Australia’s traditional progressive tax system, commencing in 2024/25 where, under their plan, the marginal tax rate of 32.5% would apply to resident individuals with taxable incomes within the band of $41,000 to $200,000.
2. $20,000 instant asset write-off extended by 12 months
The instant asset write-off ($20,000 threshold) for small businesses will be extended by 12 months to 30 June 2019.
This applies to businesses with aggregated annual turnover less than $10 million. The threshold amount was due to return to $1,000 on 1 July 2018.
Artworks continue to be eligible for the instant asset write-off, but it should be noted that purchases of art costing $10,000 or more will soon be subject to a non-cash requirement (refer to 3 below).
3. Cash payments limit: payments made to businesses
The Government will soon introduce a limit of $10,000 for cash payments made to businesses for goods and services. This measure will require transactions over a threshold to be made through an electronic payment system or by cheque. Good news for anyone still using a cheque book.
The measure will not apply to consumer-to-consumer non-business transactions or dealings with financial institutions.
It is not clear yet whether art purchased for a superannuation fund will be subject to these new cash payment rules, illustrating the need for a tax policy on the treatment of art.
For example, art purchased for a business purpose (and possibly eligible for the instant asset write-off) qualify for these new non-cash rules. But art bought for investment purposes is done with the same intent as when shares or real estate are acquired.
4. Increase in film location funding expenditure
The Government has confirmed that it will provide $140 million over 4 years from 2019-20 to attract international investment in the Australian film production and related industries through a competitive incentive program.
This funding will complement the Government’s existing Location Offset component of the Australian Screen Production Incentive tax rebate. The additional funding was flagged by the Minister for Foreign Affairs on 4 May. The Location Incentive will effectively provide an increase to the Location Offset rate from 16.5% to 30% for eligible large budget international productions that film in Australia.
5. Taxation of income for high profile individuals
High profile individuals will no longer be able to take advantage of lower tax rates by licensing their fame or image to another entity.
Currently, high profile individuals such as actors or musicians can license their fame or image to another entity (a related company or trust), and the income derived goes to the entity that holds the licence.
This measure, commencing 1 July 2019, will ensure that all remuneration (including payments and non-cash benefits) provided for the commercial exploitation of a person’s fame or image will be included in the assessable income of the individual.
6. No tax deduction for non-compliant PAYG and contractor payments
Taxpayers will not be able to claim deductions for payments to their employees such as wages where they have not withheld any amount of PAYG from these payments, despite the PAYG withholding requirements applying.
Similarly, the Government intends to remove deductions for payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (again despite the withholding requirements applying). This was recommended by the Black Economy Taskforce.
7. Proposed changes for SMSFs
The maximum number of allowable members in new and existing self-managed superannuation funds (SMSFs) will be expanded from 4 to 6 members from 1 July 2019.
For SMSFs with a history of good record-keeping and compliance, the annual audit requirement will be extended to a 3-yearly cycle. The measure will apply to SMSF trustees that have a history of 3 consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner.
8. Excise changes to benefit smaller (including craft) brewers
The Government will increase the alcohol excise refund scheme cap to $100,000 per financial year and extend the concessional draught beer excise rates to 8 litre or greater kegs, from 1 July 2019.
The alcohol excise refund scheme currently provides eligible domestic alcohol producers a refund of 60% of excise paid up to a cap of $30,000 per financial year. The higher cap of $100,000 will provide additional support to domestic brewers, distillers and producers of other fermented beverages such as non-traditional cider.
Currently, draught beer sold at licensed venues such as pubs and clubs in individual containers exceeding 48 litres is taxed at lower rates compared with beer sold in individual containers up to and including 48 litres. However, the lower rates mainly benefit large breweries, which typically use 50 litre kegs.
Extending the concessional draught beer excise rates to 8 litre or greater kegs will allow craft brewers, which typically use smaller sized kegs, to also benefit from the lower rates, levelling the playing field between craft and large breweries.
9. Measures for older Australians
The Pension Work Bonus is to increase from $250 to $300 per fortnight (ie $7,800 a year). The Bonus is to be extended to self-employed retirees, who will be able to earn up to $300 per fortnight without impacting their pension.
The pension means test rules are to be amended to encourage the development and take up of lifetime retirement income products that can help retirees manage the risk of outliving their savings.
Finally, the Pension Loans Scheme will be extended to everyone over Age Pension age and the maximum fortnightly income stream will be increased to 150% of the Age Pension rate. This will enable Australians to use the equity in their homes to increase their incomes.
These measures are proposed to commence on 1 July 2019.
10. R&D tax 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 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.
Refundable R&D tax offsets from R&D expenditure on clinical trials will not count towards the cap.
Newspaper No. 9, 2012