2019 Federal Budget Highlights
The 2019-20 Federal Budget contains few surprises and only a modicum of major initiatives: one is tempted by the view that even the Government doesn't have its heart in it.
The major – and widely expected – ititiative is an extension of the Government's personal income tax cuts from those announced in the 2018-19 Budget which match and raise the more generous benefits which Labor announced in response to the Government's previous measures: at a cost of $5.7 billion over four years.
Treasurer Josh Frydenberg said in his Budget "Lockup" press conference the Government would not try and force this measure through Parliament before it is dissolved for the election but would take the package to the electorate.
This contrasts with the Government's "Power Rebate" announced before the Budget and included in it, which the Government does plan to try and push through before the election.
Other major Budget measures are: • An extension of the small business instant asset write-off, with an increase of $5000 in the amount to $30,000 and an increase to $50 milllion (from $10 million) in the size of business eligible for the concession • $4 billion over four years for increased infrastructure spending • $1 billion in increased Medicare spending • $530 million for the Disability Royal Commission • A small concesssion removing the work test for superannuation contributions for people aged 65 and 66.
The Budget's biggest saving is a $2 billion windfall to come from a tightening of welfare payments to recipients who are also working, using the controversial automated 'Single Touch Payroll System' which businesses are being forced to adopt.
The Budget contains little information about how this will operate but says, "From 1 July 2020, income support recipients who are employed will report income that is received during the fortnight, rather than calculating and reporting their earnings. Each fortnight, income data received through an expansion of STP data-sharing arrangements will also be shared with the Department of Human Services, for recipients with employers utilising STP."
The Government is increasing the instant asset write-off threshold from $25,000 to $30,000 and expanding access to medium-sized businesses with an annual turnover of less than $50 million (from $10 million previously).
These changes will apply from 7:30pm (AEDT) on 2 April 2019 to 30 June 2020. The Government has previously announced (and legislated) that the company tax rate for small and medium-sized companies with an annual turnover of less than $50 million has been lowered to 27.5 per cent. This rate will be lowered further to 25 per cent by 2021-22 as the Government accelerates its plan to deliver lower tax rates. Similar timing applies to the increases in the unincorporated small business tax discount rate, which will increase to 16 per cent by 2021-22 (up to the cap of $1,000).
The Government is providing more than $1 billion to extend the operation of the ATO's Tax Avoidance Taskforce, and to expand the Taskforce's programs and market coverage.
This measure is estimated to raise $4.6 billion in over the forward estimates period and will help ensure that multinationals, big business and high wealth individuals pay the right amount of tax in Australia.
The Government will also provide $42.1 million over four years to the ATO to increase activities to recover unpaid tax and superannuation liabilities including from large corporate entities and high wealth individuals.
The Government will also strengthen the Australian Business Number (ABN) system to target ABN misuse, enhance the quality of Australian Business Register data and improve ABN holder engagement and compliance, estimated to result in an additional $22.2 million gain to the budget over the forward estimates.
From the 2018-19 income year, additional tax relief will be provided to low- and middle-income taxpayers through an increase to the current low and middle income tax offset (LMITO).
Under the changes, the maximum tax relief provided by LMITO will increase by $550 from the previous level of $530 to a new maximum of $1,080. The base amount will increase from $200 to $255 for 2018-19 and the next three income years. The LMITO will be received after individuals lodge their 2018-19 tax returns and will continue to be provided in addition to the low income tax offset (LITO).
The LMITO will assist over 10 million Australians, with about 4.5 million taxpayers with taxable incomes between $48,000 and $90,000 receiving the full $1,080 reduction in tax for 2018-19. Families with two people earning between $48,000 and $90,000 will receive a total reduction in tax of $2,160. Around 2.3 million Australians with taxable incomes less than $37,000 will receive an offset of up to $255.
This additional tax relief builds on the increase to the top threshold of the 32.5 per cent tax bracket from $87,000 to $90,000, which took effect from 1 July 2018.
The Budget contains a $75 million measure over four years to allow 65- and 66-year-olds to make voluntary contributions to their superannuation without having to meet a work test.
The current rule requires people aged 65 and over to work for a minimum 40 hours over a 30-day period in the relevant financial year.
The Government will allow voluntary superannuation contributions (both concessional and non-concessional) to be made by those aged 65 and 66 without meeting the work test from 1 July 2020. People aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule. Those up to and including age 74 will be able to receive spouse contributions, with those 65 and 66 no longer needing to meet a work test. This measure is estimated to reduce revenue by $75.0 million over the forward estimates period.
Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they self-report as working a minimum of 40 hours over a 30 day period in the relevant financial year. Those aged 65 and over cannot access bring-forward arrangements and those aged 70 and over cannot receive spouse contributions. Aligning the work test with the eligibility age for the Age Pension (scheduled to reach 67 from 1 July 2023) and increasing the age limit for spouse contributions to 74 will give older Australians greater flexibility to save for retirement.
Aging and Aged Care
The Government is investing $282 million to support Australians who wish to stay at home for longer by providing an additional 10,000 home care packages across all levels.
This brings to 40,000 the number of additional home care packages the Government has delivered since the 2017-18 MYEFO.
In addition, the Government is investing $7.7 million to develop an end-to-end compliance framework for home care, and Australians with dementia or requiring cognitive support will benefit from additional funding for home care supplements.
The Budget includes an additional 13,500 residential care places available from 2018-19 - the largest number ever in a single funding round. In addition, the Government is providing $60 million for residential care infrastructure.
The Government is providing a $320 million general subsidy boost in 2018-19 for residential aged care.
The Government is providing $1.5 million to develop a Serious Incident Response Scheme and $8.4 million to introduce mandatory reporting against national residential care quality indicators.
For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000. • Access to refunds of indirect tax, including GST, fuel and alcohol taxes under the Indirect Tax Concession Scheme has been granted or extended.
Currently, primary producers and tourism operators may be eligible for a partial refund of the luxury car tax paid on eligible four-wheel or all-wheel drive cars, up to a maximum refund of $3,000. The eligibility criteria and types of vehicles eligible for the current partial refund will remain unchanged under the new refund arrangements.