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2019/20 Federal Budget - What does it mean for you?

5 April 2019

Last night we witnessed Bill Shorten releasing Labor’s 2019 Budget in reply speech. Today we compare the measures within the Liberal Governments budget and Labor’s response to decipher what it means for our clients. 

Individuals

Personal Income Tax Plan

  • The Liberal Government intends to lower taxes for individuals by building on its legislated Personal Income Tax Plan from the 2018-19 Budget.  This will provide immediate relief to low and middle income earners. It would also introduce structural changes to provide more reward for effort and to maintain our international competiveness
  • Labor, will support the first step in this plan which provides a further reduction in tax by way of a non-refundable low and middle income tax offset (LMITO). Under the changes, the maximum tax offset will increase from the previously proposed amount of $530 to $1,080 with the base amount increasing from $200 to $255. The LMITO will apply from the 2018-19 year. This measure will benefit individual taxpayers with taxable incomes of up to $126,000
  • Labor promises to go even further and provide additional tax cuts to taxpayers who earn less than $45,000 by increasing the low and middle income tax offset base amount from the $255 in the budget to $350
  • Labor will not support the other changes to individual income taxes announced in the budget that would provide tax cuts to those earning more than $126,000

 

Business

The instant assets write off

  • The Government increased the instant asset write off threshold from $25,000 to $30,000. Small businesses (with aggregated annual turnover of less than $10 million) will be able to immediately deduct purchases of eligible assets, costing less than $30,000 that are first used, or installed ready for use, from Budget night 2019 to 30 June 2020
  • The previous $20,000 immediate asset write off threshold applied to 29 January 2019
    Between 29 January 2019 and 2 April 2019 the threshold increased to $25,000 will apply, with the $30,000 threshold to applying from 7.30PM (AEDT) 2 April 2019
  • Medium sized businesses (with aggregated annual turnover of $10 million or more, but less than $50 million) are also able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from Budget night 2019 to 30 June 2020

 

These measures have already been passed by both houses of Parliament, and are awaiting Royal Assent.

 

Labor’s other key promises proposed in the 2019-20 Budget reply speech

Other key Labor announcements in the reply speech last night included:

  • Significant pledges for health funding headlined with $2.3 billion dollars for cancer care
  • Funding to boost the number of apprenticeships
  • $1 billion pledge over four years on TAFE and apprenticeships

 

These announcements are on top of previous Labor announcements that have already garnered a lot of media attention, including:

  • The announcement that they will abolish cash refunds for excess franking credits
  • The announcement to crack down on negative gearing, including a proposed reduction in the capital gain discount from 50% to 25%
  • The announcement to reduce in non-concessional superannuation contribution caps
  • The announcement to reduce the Division 293 income threshold down to $200,000
  • The announcement to prohibit direct borrowing by SMSFs for “housing investments”

 

As the Labor announcements have not yet been costed or elaborated on, specific details of these measures are unavailable at this stage; however, Labor promised there would still be a budget surplus in 2019/20 and bigger surpluses into the future than have been outlined in the budget itself.

 

Non Tax related measures – proposed in the 2019-20 budget

Emergency Response Fund

The Government will review its fund arrangements to establish the Emergency Response Fund from 1 October 2019 to fund natural disaster recovery and response initiatives above and beyond existing state and federal programs.

 

North Queensland Flood Recovery Package

The Government will provide $3.1 billion over five years from 2018-19 to support North Queensland’s livestock industry and associated communities to recover from the impacts of the 2019 flood event.

 

Concessional Treatment for the Forced Sale of Livestock under the Farm Household Allowance Program

The Government will exempt net income generated from the forced sale of livestock from Farm Household Allowance (FHA) payment assessment, when that income is invested into a Farm Management Deposit. This measure will ensure that FHA recipients who are destocking retain access to income support and are able to make long term financial plans for their future.

 

Energy Assistance Payment

The Government will provide a one-off Energy Assistance Payment of $75 for singles or $62.50 for each member of a couple who are eligible social security payment recipients.

With the House of Representatives not scheduled to sit again until the 15th of April it is anticipated that no further measures will be legislated before the federal election.  This effectively means we’ll likely need to wait for the results of the election before we’ll know which parties plan will be likely to progress.

 

If you have any specific questions about how the 2019-20 budgets may impact you or your business, please speak with your local Boyce accountant.

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