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Checklist: 2018/19 Tax Changes For Small Business 

Company tax cuts

For 2018/19 income year, companies with an annual aggregated turnover under $50m will have a reduced tax rate of 27.5%. To be eligible for the reduced rate, the company must be a base rate entity.

Instant asset write-off increased, extended and allowed for medium-sized businesses

The $20,000 instant asset write-off for small business has been increased to $30,000 from 2 April 2019. The scheduled end date of the write-off has been extended from 30 June 2019 to 30 June 2020.

Also, there is another limit of $25,000 which is available from 29 January 2019 to 2 April 2019.

For medium-sized business, which is defined as being over $10m in aggregated turnover but under $50m, an entitlement to a $30,000 instant write-off is allowed until 30 June 2020. The assets must be purchased after 2 April 2019.

Single touch payroll

Entities who are employers are required to report the following information to the ATO from 1 July 2019:

             • withholding amounts and associated withholding payments, on or before the day by which the amount is required to be withheld

             • salary or wages and ordinary time earnings information on or before the day on which the amount is paid, and

             • superannuation contribution information on or before the day on which the contribution is paid.

There are some exceptions to the single touch payroll allowed for employers who only make payments to closely held employees.

Non-compliant withholders to be denied tax deductions

From 1 July 2019, businesses will no longer be able to claim deductions for payments to their employees where they have not met their PAYG obligations. This includes where the employer is required to withhold PAYG from gross payments, but fail to report or remit it to the ATO.

PAYG withholders will be required to ensure that all lodgements are made on time to avoid large penalties with denied tax deductions.

Additionally, the deduction for businesses on certain payments to contractors which have not met PAYG obligations will be denied unless a genuine mistake has been made.

Taxable payments reporting system

Beginning with the 2018/19 income year, the following industries have introduced a taxable payments reporting system:

             • Couriers

             • Cleaners

Starting from 1 July 2019, the taxable payments reporting system will be extended to include the following industries:

             • Security services

             • Road freight

             • IT services

Entities who engage contractors, or subcontractors, will need to provide additional reports to the ATO. This treatment has the same requirements as salary and wage employees.

Similar business test

A company is now allowed to claim a prior year loss against business profits as long as it satisfies the similar business test from 1 July 2015. This test adds on to the same business test, which was less flexible to pass.

The former same business test is failed unless the company carries on the same business and has not derived income from any new kinds of business or transactions. The new test makes it easier for companies to pass where early investors have entered the company ownership.

As the legislation takes effect as of 1 July 2015, companies in this position have an opportunity to amend income tax returns from the 2015/16 income year. Also, a company going back and amending their tax return to include the company loss deduction would do so in that prior year at a higher company rate. However, careful analysis of the company loss is advised.

Fodder storage assets allowed immediate write-off

For primary producers, a new law has been enacted which allows fodder storage assets to be immediately written off.

Fodder storage assets may include silos and hay sheds, and are used to store grain and other animal feed. The immediate write-off will apply if the asset is purchased and first installed ready for use on or after 19 August 2018.

R&D tax incentive change not law

The research and development (R&D) tax incentive was due to be amended for income years starting 1 July 2018. Under the announcement, the incentive would have been based on an uplift of the entity's corporate tax rate in the particular income year.

However, changes relating to a company's "R&D intensity percentage" have not become law. All rules as they related to R&D have not changed for companies.

 

Checklist: 2018/19 Tax Changes For Individuals 

Change for low income tax offset and LAMITO

A low and middle income tax offset (LAMITO) was introduced on 1 July 2018. The offset will run in conjunction with the low income tax offset as a targeted reduction of income tax for Australian residents.

The LAMITO provides an additional offset of up to $200 for individuals on a taxable income of $37,000 or less. Taxpayers up to $48,000 will get an increased LAMITO up to the maximum amount of $530.

The maximum LAMITO will be available for incomes up to $90,000, and will phase out for individuals with a taxable income of $125,333.

The LAMITO will be available for four years, ending with the 2021/22 income year. At this point, further income tax reductions will absorb the LAMITO.

Personal income tax cuts

For the 2018/19 income year, the top of the 32.5% tax bracket has moved from $87,000 to $90,000. That means that individuals above $90,000 in taxable income will save $135 in income tax this year compared to last year.

CGT main residence removal for foreign residents still not law

It was announced on 9 May 2017 that foreign residents would no longer have access to the CGT main residence exemption. Coupled with this, a grandfathering arrangement was in place where a foreign resident could still use the main residence exemption up until 30 June 2019.

However, at the time of writing, this legislation has not passed through parliament, meaning no changes have been made for individuals in this situation.

"Catch-up" superannuation contributions

Starting from 1 July 2018, the "catch-up" superannuation contributions rules apply. For the current income year (2018/19), individuals can carry forward unused amounts up to the concessional contributions cap of $25,000.

These rules are only in effect for individuals with a total superannuation balance of less than $500,000. This means the balance as at 30 June 2019 for individuals wishing to make a "catch-up" concessional contribution in the 2019/20 financial year. Unused amounts can be carried forward for five years.

Individuals who anticipate an increase in income to a higher tax bracket in the 2019/20 financial year may wish to take advantage of a larger tax deduction.

Downsizer contributions now available

An individual who is aged 65 or over may make "downsizer contributions" from the proceeds of the sale of a dwelling that was the person's main residence, applicable to the proceeds from contracts entered into on or after 1 July 2018.

First home super saver scheme

Voluntary contributions up to $15,000 can be made by an individual who has yet to purchase their first home into their superannuation account. The scheme allows the individual to withdraw this contribution plus earnings in order to be used for a first home deposit.

Voluntary contributions made after 1 July 2018 may be used for withdrawal in the Scheme.

HELP repayment levels set to change

From 1 July 2018, students with a HELP debt may need to start repaying the debt on earning $45,000. This lower threshold is significantly lower than previous years ($51,957 in 2017/18), and is necessary for individuals who have become non-residents.

Insurance policies in super to become "opt-in"

Superannuation members who are inactive will need to "opt-in" with their life insurance and TPD providers from 1 July 2019 to retain their current policies.

Inactive members are individuals who have not had a contribution or roll-over into their account for 16 months. As at 1 July 2019, this will apply for accounts without a contribution or roll-over since 1 March 2018.

Work test exemption for low balance retirees

The work test has been removed for recently retired individuals, commencing 1 July 2019. Announced in the 2018 federal budget, this applies to voluntary superannuation contributions for individuals over 65 years of age.

For the first year in which an individual is greater than 65 years of age and does not meet the work test, a voluntary contribution may be made. However, this contribution will only be allowed if the individual met the work test in the previous year, regardless of whether they were under 65 years or not. Also, the member's total superannuation balance at the beginning of the year needs to be under $300,000.

Image rights to be included on individual returns only

The use of "public fame" or "image rights" in a third party entity was due to be removed from 1 July 2019. This meant that using image rights would be restricted to individual returns. However, this proposal from the 2018 federal budget has not become law.

Vacant land expenses no longer deductible for "build-to-rent"

Claiming tax deductions during a "build-to-rent" investment has been proposed to stop from 1 July 2019. This measure was announced in the 2018 federal budget, but is yet to become law.

A taxpayer may still be prudent to bring forward some payments, where possible, to claim a deduction this year. It is unconfirmed at the time of writing whether this announcement will be introduced into parliament in the future, still with the current expected start date.

 

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained. 

 

 

 

 


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