31 May How the 2018 Budget Affects You and Your Business
At Conrad Carlile, we think it is important for everyone to understand how the budget affects you. There are so many aspects that aren’t important, but how does it affect the small business owner from a wealth management perspective? We’ve written up a few of the areas that will apply to you as a small business owner, including income tax, changes to superannuation and the extension of the $20,000 instant asset write-off scheme. This year’s budget has been developed with a view to enhancing the national economy, so it’s vital to have an understanding of how the changes can affect both you and your business in 2018.
There are several aspects of the new budget that may affect both you and your business in the coming financial year. A few of the top changes are:
- The top threshold for income tax will increase to $90,000 from July 1 2018.
- From 2018 -19 financial year through to 2021-22 financial year, a new tax offset of $530 will be available for low and middle income earners in addition to the low income tax offset of $445.
- From 2022-23 the 19% top threshold increases from $37,000 to $41,000 and the $45 LITO increases to $645.
- From 2022-23 the 32.5% top threshold will increase to $120,000.
- The top marginal tax rate of 45pc will apply to income above $200,000 from July 1 2024, the 37% tax bracket will be abolished completely, reducing the number of tax brackets from five to four.
The above changes will ensure Australians earning more than $41,000 will only pay 32.5% up to the top marginal rate. The $20,000 instant write off for small businesses with turnover of up to $10 million will be extended to June 30, 2019. You’ll have some tax changes to get inline for the year ahead, and even more tax changes for your employees a few years after that meaning it has never been more important to ensure your payroll system and processes are up to date.
Business Activity Statements
Changes to Business Activity Statements (BAS) will see the number of compulsory questions reduced from 20 to three. The streamlining of GST reporting is expected to save small businesses an average of $590 each per year.
Research and development tax incentive
The Research & Development tax offset has been aligned to company tax rates and has been capped at $4 million for businesses with an annual turnover of less than $20 million. This is expected to negatively impact small businesses that rely on the tax concession to compete with larger businesses.
Small businesses entity turnover threshold
Small businesses will be given greater access to a range of tax concessions with the small business entity turnover threshold being extended from $2 million to $10 million.
Superannuation is another area which will several changes under the new budget, including lost super accounts, exit fees and more. Let’s take a look as a few of these changes:
- From July 1, 2019 the ATO will be given capacity to actively reunite Australians with their lost and inactive superannuation. This will help minimise account balance discrepancy through fees for those with multiple super accounts.
- Inactive accounts below $6000 will be transferred to the ATO to protect from further discrepancy and fees on these accounts will be capped at 3%.
- Superannuation fund exit fees will be banned if the member is changing super providers.
- Life insurance cover in superannuation for young savers under age 25 will be changed to an “opt” in basis.
- Australians aged 65 to 74 will be given a 12-month exemption from the superannuation work test to help boost retirement savings. The 12 months starts from the end of the financial year in which they last met the work test.
- From July 1, 2018 some high income earners (above $263,157) with multiple employers will be able to nominate that their wages are not subject to Superannuation Guarantee.
- From July 1, 2018 individuals will be required to confirm their income tax returns have complied with “notice of intent” requirements in relation to their personal superannuation contributions.
- The maximum number of members permitted within a self managed superannuation fund will increase from four to six.
An extended Pension Work Bonus will allow age pensioners to earn up to $300 per fortnight, which is an increase of $50 per fortnight without reducing their pension payments. Self employed individuals will now be able to earn up to $7800 per year without reducing their pension payments. The government will provide up to $10,000 in wage subsidies for employers who employ Australians aged 50 and over.
Extension of the $20,000 instant asset write-off scheme
Lastly, and a favourite for small businesses, the $20,000 instant asset write-off scheme has been extended for another year. If you’re a small business owner, you can instantly claim any business plant and equipment if you buy it in the 2018–19 financial year. It just has to be installed and ready for use by then. If you have been planning for significant expenditures, it means you can be certain you can afford it in the year ahead. However, before making a large purchase, it is important to have a professional to assess how the asset will benefit your business.
There are other areas of the budget that may affect your business specifically. Email our team at firstname.lastname@example.org, send an online enquiry or call us on 07 3871 1522 to discuss your business circumstances and how these tax changes could benefit your business.