2019/20 Budget Review: Frydenberg’s “Back in Black” budget to woo voters
It all begins with an idea. Maybe you want to launch a business. Maybe you want to turn a hobby into something more. Or The 2019/20 Federal Budget was handed down by Treasurer Josh Frydenberg on Tuesday evening 2 April 2019 and in what has typically become the norm over recent years, much of the budget material was released in the lead up to Budget night.
The Budget forecasts a surplus of $7.1 billion for the 2019/20 year, for the first time in 12 years.
From a taxation view point, there certainly were no nasty surprises revealed on the night and with a Federal Election looming for next month it’s fair to say politics certainly play a big part in the in the budget with the Government focusing on tax cuts for low to middle income earners, backing small business and infrastructure spending, all designed to woo voters.
Given that we will be heading to the polls some-time next month and it is unlikely that any legislation will make it to parliament before the election is called, for now it is a “wait and see what happens approach” which we need to apply to all that was announced.
The Government’s Budget certainly is in strong contrast to the Australian Labor Party on many of its policy platforms, particularly on superannuation. This Budget leaves much of the superannuation system alone with just a few carrots being dangled while the Opposition’s policy has a significant negative impact on the incomes of Self-Funded Retiree’s through their intended changes to refundability of franking credits and contributions rules. SMSF members are likely to be in a worse off position than other superannuation fund members under Labor’s intended changes.
With the Government handing out sweets in this budget to low- and middle-income earners and self-funded retirees, the opposition have moved to reveal more like the entire candy store in its war chest in their Budget Reply promising among other things, better tax cuts for low income earners and significant enhancements to Medicare coverage for cancer treatments including free and better access to MRI's, to appeal to the voting public while maintaining their position on cracking down on negative gearing and franking credit refunds.
It's now quite clear if it wasn't already, that the upcoming election will be won and lost on the basis of this week's budget announcements.
So, without getting too bogged down in the details for now, we’ve set out below a summary of the key Budget announcements from the current Government which we see affecting individuals and small business – the “winners” and the “losers” - to see how you will be affected if the Government does get re-elected next month.
The “Winners”
Individual Tax Payers:
Low- and Middle-Income Tax Offset will increase from a maximum amount of $530 to $1,080 per annum for single income families (and up to $2,160 for dual income families) with effect from the 2018/19 year applicable through to 2021/22.
$302 billion package of personal tax cuts to be rolled out over the next decade. By building on tax cuts announced in the previous budget, further tax cuts will be introduced from 1 July 2022 and 1 July 2024. The Government expects that by 2024/25 94% of tax payers will be paying no more than 30 cents in the dollar tax.
Medicare Levy Thresholds to be increased for 2018/19.
Small Business Owners:
The existing small business instant asset write off threshold will be lifted to $30,000 and eligibility will be expanded to include businesses with up to a $50 million turnover. If legislated this change will apply to assets purchased from 7.30pm AEDT 2 April 2019 to 30 June 2020. [Note: this measure received bipartisan support and was passed by both houses of parliament on 4 April 2019 - so is going ahead ]
Companies with a turnover of less than $50M per annum will have their tax rate lowered to 25 per cent by 2021/22.
Previously proposed reform of the Division 7A rules will be deferred to 1 July 2020 to allow further consultation on the amendments to be possible.
Older Australians / Superannuation
$252 million provided for 10,000 new home care packages to assist older people continue living in their own home rather than enter age care facilities.
Persons aged 65 and 66 will be able to make voluntary contributions without having to meet the “Work Test”. Currently once individuals reach age 65, they must work a minimum of 40 hours in a consecutive 30-day period in order to be eligible to make contributions to super. This change is intended to align the eligibility age for the age pension with the superannuation contribution rules.
In conjunction with the Work Test change referred to above, the “bring forward” provisions permitting individuals to contribute up to two future years of non-concessional contributions in one financial year will be extended to persons age 65 and 66. Currently to access the bring forward provisions an individual must be 64 or under at 1 July in the income year the contributions are being made.
Spouse superannuation contribution age limit will be increased to age 74, up from the current maximum age of 69.
The Government will streamline administrative requirement for the calculation of exempt income for funds paying a pension. The measures will result in some funds which currently are required to obtain an actuarial certificate to no longer have to do so. The new measures would commence on 1 July 2020.
Infrastructure:
A record $100 billion has been allocated in funding for road and rail projects over the next 10 years.
Health:
Increased funding for access to MRI’s for patients with breast cancer
New medications listings on the PBS
$5 billion for a Medical Research Future Fund
$737 million over 7 years for additional mental health services including funding to address youth suicide prevention
$337 million drug strategy targeting the harmful effects of illicit drugs and tobacco and alcohol
Education:
$453 million to extend pre-school education in the year children before entering full time schooling from the 2020 school year, to better prepare children for education
$525 million package for the vocational education and training sector that will fund 80,000 new apprenticeships and double incentive to employers to $8,000 per placement.
The “Losers”
Multinationals:
The ATO is be given an extra $1 billion to hunt down multinationals not paying their tax. This measure is predicted to generate $4.6 billion is revenue for the Government.
Start-ups:
R & D tax incentives will be cut by a further $1.35 billion
Welfare rorters:
There will be further scrutiny of those who receive a payment from Centrelink but also work part-time to be conducted by both the Australian Taxation Office and the Department of Human Services
What’s next and how can we help?
For now, there is little we can do but wait for the outcome of the upcoming Federal Election to unfold to see if these measures will ever come to fruition. We will also continue to monitor what other election promises come out from all parties, we expect there will still be further announcements made.
Post-election we will most certainly be providing further commentary and review so keep an eye out for those details.
In the meantime, if you would like to discuss any of these measures in further detail and how they might apply to you, please don’t hesitate to get in touch with us.