Last night the Treasurer, Josh Frydenberg, handed down the Federal Budget 2019-20. Whilst some would suggest that this a typical pre-election budget, there are some significant benefits for the majority of our clients.
The most significant announcement was that the budget is “back in the black” with a forecast surplus in the 2019/20 year of $7.1b. This is significant as it has been a long time coming and amounts to a significant interest bill reduction to be able to fund essential services, infrastructure projects and help expand the overall economy to the benefit of all.
Other significant changes in the Federal Budget
Other significant changes that will impact people, are lower tax rates, an increase in the Medicare low income threshold, and the expansion of the instant asset write off for most businesses. All of which should have a positive impact on a slowing economy and allow Australia to maintain a competitive tax position in a Global economy where countries are increasingly competing for our most talented individuals and businesses.
Professionals Tax Cuts
Australians are able to earn more and keep more of what they earn, and even professionals on higher incomes can make the most of this.
The highest tax band has been expanded to incomes over $200,000, up from those over $180,000. This means that all taxpayers on salaries between $45,0001 and $200,000 would be taxed at the lower rate of 30 per cent.
Good news for Businesses and Business Owners
The good news for businesses is that more will be eligible for an instant asset write-off on purchases valued at up to $30,000, which will also see substantial tax cuts introduced.
- Originally introduced as a temporary measure for purchases under $25,000 in value, then increased to $25,000, it has now been increased again to $30,000
- These eligibility requirements have been updated to businesses with an annual turnover of up to $50 million which enables 220,000 in addition to access the write-off
- The government also noted that it has “legislated to bring forward the increases to the unincorporated small business tax discount rate, rising from 8 per cent currently to 13 per cent in 2020–21 and to 16 per cent from 2021–22 (up to the existing cap of $1,000)
- The government said it would direct $525 million to ‘upgrade and modernise’ Vocational Education and Training (VET)
- Further resource was allocated to establishing Training Hubs to facilitate better connections between employers and school students, targeting skills shortage
Additional business incentives
In addition to the asset write-off for businesses, other incentives that are of benefit to your business include:
- The roll out of e-invoicing with the aim of reducing transaction costs by $28 billion over the next decade
- Reducing the number of BAS GST questions by education to streamline GST reporting for small businesses
- $60 million in funding for export development grants
- Reaffirmed commitment to the establishment of a $2 billion Australian Business Securitisation Fund which will focus on enhancing small businesses’ access to finance
Unlike many previous budgets there were fortunately not many changes to superannuation. I say fortunately as on most previous occasions there has usually been a sting in the tail. However, this time there appears to be only positive news for those 65 or 66 years of age who will no longer have to meet a work test to be able to contribute to super. Also, the spouse contribution rules will be extended to those between ages 70 to 74.
Positive news for South East Queensland
Finally, for those of us who live in the SE corner there was some very positive news on the infrastructure front. Additional funding for the M1 corridor, light rail expansion on the Gold Coast and fast rail business case for Brisbane to Gold and Sunshine Coasts.
Keep up to date
It will be interesting to see how Labour responds in coming days as it is going to be difficult to explain away the negative effects of their proposed franking credit changes, capital gains tax and negative gearing proposed changes. With an election just around the corner we will update you in coming months on how and when these changes will likely impact you should there be a change in government which the poles are currently predicting.
Quill is a team of financial specialists, working with professionals and entrepreneurs to take their financial and business growth to the next level. Get in touch with the Quill team today.