The 'hear hears' have subsided, suits and ties removed and we wait for the obligatory opposition response. Our team has been cutting through the crap to identify some of the aspects of the budget that impact YOU.
Another year, another budget and another late-night party for the crew at Illumin8.
We broke out the budget bingo cards, placed a few friendly bets (will #scomo smile or not) and waited in anticipation for the speech that draws the attention of maybe 12% of the nation.
Well, it looks like this year’s budget is one that definitely tries to show that your little brother that has been a pain in your butt for a while has had a change of heart. Possibly because he wants to borrow your car for a road trip or something. The Turnbull government have announced a range of gifts to various areas of our nation. The question is, what ones will actually make it into law, and what will fade into the abyss. Will the Coalition lose power in the next election (likely to happen pre May 2019) and thus the replacing government throws the budget papers into the bin (hopefully recycling) and start with their agenda?
So – team Illumin8 has some thoughts on changes that impact our clients. Have a read, and if anything sticks out to you, give us a buzz!
Individual Tax Rates
The 2018 budget has proposed immediate changes to the Low Income Tax Offset with 2019FY tax bills to be reduced up to $530 on a sliding scale if you earn under $125,000 per annum.
In addition, the plan is to simplify tax brackets over the next few years. The first change is to increase the upper limit of the 32.5% tax bracket from $87,000 to $90,000 in the 2019FY, which is estimated to save 210,000 Australians a decent chunk.
From there, under additional changes in 2023FY and 2025FY, the 37% tax bracket will be eliminated – resulting in Australians earning between $41,000 and $200,000 paying a flat tax rate of 32.5%.
What does this mean for you? Is it feasible to have Australians earning $41,000 being taxed at the same tax rate as those earning $200,000? Will we see some form of levy charged to those at the higher end of the bracket? We will keep you posted with what gets adopted by the government so stay tuned!
20k Write Off
Although the budget centred around cuts to Income tax at the individual level, there is some good news for small business owners as well. Continuing as per last the last two tax years, the government has extended the deadline for accelerated depreciation (immediate write-off) of assets that cost under $20,000 until 30 June 2019.
Under regular depreciation rules, when you purchase an asset for use in your business, you cannot claim the entire cost of the asset in your income tax return for that year, you instead claim it over time. Under the accelerated depreciation rules, small businesses are able to claim the entire cost of an asset in the financial year they incurred it. These rules are simply moving when you claim the tax deduction, not a tax cut. Regardless, still a massive win for the small business owner where cashflow is everything.
But as we always say, just because it’s tax deductible doesn’t mean you should buy it!
As the government continues to look at the future cost of caring for the aging population, this Budget is making it easier for younger people to grow their superannuation balances through:
- Removal of super exit fees when moving your balance to a new fund (ordinally no more than $50);
- Making it easier to find and combine inactive super account balances;
- Removal of automatic life insurance policies being taken out on new super accounts for individuals younger than 25.
In addition to the above, from 1 July 2018, eligible first home buyers will be able to apply to withdraw their extra super contributions made since 1 July 2017 to use a deposit for a home. If this is something you are considering, or interested in knowing how this could impact you, we recommend getting in touch with a financial adviser.
Pension Work Bonus
#SCOMO announced that the government is set to increase the work pension bonus, allowing pensioners to earn up to $7,800 a year without impacting their pension payments.
This would mean pensioners could earn an extra $1,300 without affecting their payments and, for the first time, the work pension bonus will extend to self-employed pensioners! Great news!
If you are at pension age, we would recommend teeing up a time with a financial advisor to see if this impacts you.
So who is the real winner of #Budget2018?
Without a doubt, it was the moment when #SCOMO was being interviewed by Leigh Sales and she managed to get him to say doodoo. Everyone loves a poo joke.
Victorian Budget Snapshot
Whilst the federal budget is all full of bells and whistles, the Victorian budget had a few announcements at the same time.
The main one impacting small businesses revolves around Payroll Tax.
The cost of employment for those with large workforces will drop slightly with a change to the payroll tax rates. Businesses in regional areas will now only pay 2.45% on payroll costs in excess of $650k (half the rate for other businesses).
The $650k threshold is an increase of 25,000 from the current year.
So, What Now?
Want to know if any of the above changes will impact you specifically? Let’s catch-up and organise a Tax Planning meeting to plan in detail what you need to do prior to 30 June to ensure you’re paying less tax.
Get in touch with the illumin8 team if you’ve like to chat further!