Budget 2018 Update - Tax Store Osborne Park
Nitin Vashisht, CPA at Develop and Prosper in WA even Today
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November 1, 2018

Budget 2018 Update

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The Government handed down the 2018/19 Federal Budget on Tuesday 8th May 2018. Some of the important proposals include:

Extending the Small Business Instant Asset Write off

The $20,000 immediate write-off for small business that was to expire on 30th June 2018.

Good news is that it is now extended by a further 12 months to 30 June 2019. This is a major win for small businesses with a turnover of less than $10 million. It will help them accelerate the write off on capital expenditure of up to $20,000. So you can still claim it in one year rather than over multiple years. Assuming a tax rate of 30%, this could help a small business save an approx. $4,500 in tax.

Increasing the number of members for SMSF

Currently, a Self-Managed Super Fund can have a maximum of 4 members. It is proposed relax it to six members from July 1, 2019 . This will make SMSFs more attractive with a total concessional contribution of $150,000 p.a. instead of only $100,000 p.a. Business associates will have more to invest in commercial property with this proposal.

Low and Middle Income Tax Offset

The proposed Low and Middle Income Tax Offset (LMTO) is a new non refundable tax offset of up to $530 annually form 2018-2022. Tax payers earning between $48,000 to $90,000 will get the maximum benefit of $530. Those earning from $90,001 to $125,333 will see the offset phase out at a rate of 1.5 cents per dollar.

This offset will apply in addition to the Low-Income Tax Offset.

Increase in tax bracket and removal of bracket creep

The budget 2018 propose to reform the tax burden in a three step process between 2018 to 2024. The first step will provide tax relief to low and middle income earners. The second step will help tackle bracket creep and the third step will simplify and flatten the system.

From 1 July 2018, the top threshold of the 32.5 per cent tax bracket from $87,000 to $90,000 which is expected to save $135 p.a. to about 3 million taxpayers.

In the second phase from 1 July 2022 the top threshold of the 32.5 per cent tax bracket will be increased from $90,000 to $120,000, providing a tax cut of up to $1,350 per year.

The third phase from 1 July 2024 takes a major step of opposing the increase of the top threshold of the 32.5 per cent tax bracket from $120,000 to $200,000 and removing the 37 per cent tax bracket completely. This will be a significant reform benefiting 31% of taxpayers by bringing their marginal tax rate down to 32.5%.