“Tonight, I announce that the Budget is back in the black, and Australia is back on track…paying its own way.”
“Australia is stronger than when we came to Government six years ago. Growth is higher. Unemployment is lower. There are fewer people on welfare. There are a record number of Australians with a job. School and hospital funding are at record levels.”
“So, tonight, I am pleased to announce a Budget surplus of $7.1 billion” (albeit a forecast surplus for 2019-20) …”a $55-billion turnaround on the deficit we inherited six years ago” … and “A total of $45 billion of surpluses over the next four years.”
So said Treasurer Josh Frydenberg, as he handed down his first Federal Budget on 2 April 2019, a Budget, he said, intended to focus on restoring the nation’s finances, create new jobs with a strong skills and infrastructure agenda, and guarantee schools, hospitals and aged care. And, as he frequently emphasised “all done without increasing taxes”.
The general consensus ahead of this budget was that it would aim to win friends and offend few people, and perhaps win an election that must be held within the next six weeks. And what emerged was Scott Morrison pinning his government’s re-election hopes to a $302 billion tax cut plan aimed at John Howard’s battlers and the promise of a record $100 billion in congestion “busting” infrastructure, increased funding for schools and hospitals and putting money in the hands of small business. The Australian online subsequently referred to it as ‘a direct pitch to win back middle Australia through a doubling of the existing tax cuts while rolling cash out the door for suburban commuters, tradies, family businesses and pensioners.’
This pitch will include “more than doubling the low- and middle-income tax offset from 2018-19. Taxpayers earning up to $126,000 a year, including teachers, tradies and nurses, will receive a tax cut. For a single-income family, this means $1,080 in your pocket per year. And for families on a dual income, this is up to $2,160 per year in your pocket” said the Treasurer. “More than 10 million taxpayers will benefit with 4.5 million receiving the full amount.”
Small businesses, the “engine room of our economy”, will receive additional tax relief. “We want small business to prosper and we are backing them to do so, cutting their taxes to 25 per cent, increasing their access to finance with a new $2 billion fund, ensuring small business is paid on time, both by government and big business, and from tonight the instant asset write-off will be increased and expanded. It will be increased from $25,000 to $30,000,” he said. This extension of the instant asset write-off was a move the Shadow Treasurer, Chris Bowen also supported on the ABC later in the evening.
And there was spending. The Treasurer announced spending on infrastructure will be lifted to “$100 billion over the decade”, all without an increase in taxes. The government intends to “deliver new infrastructure projects to ease congestion in our cities, to unlock the potential of our regions, to better manage population growth, and to improve safety on our roads,” he said, as he announced “increasing the Urban Congestion Fund fourfold from $1 billion to $4 billion”. This fund will focus on immediate, practical measures to cut travel times within cities, removing bottlenecks and improving travel corridors.
There’s also a strong focus on regional spending, aimed at making “regions stronger and our country stronger”. In particular, the Morrison Government is “providing $6.3 billion in drought support and $3.3 billion for those affected by flood. Expanding the National Water Infrastructure Development Fund, establishing the Future Drought Fund, extending the Farm Household Allowance and supporting graziers through a new North Queensland Livestock Recovery Agency,” said the Treasurer. The government will establish a new, $3.9 million Emergency Response Fund intended to ensure additional resourcing is available to support future natural disaster recovery efforts.
Mr Frydenberg also announced strong support for skills, with a $525 million package to ensure Australians “have the skills they need for the jobs of today and the jobs of tomorrow”. This will include creating 80,000 new apprenticeships in industries with skills shortages, and doubling incentive payments to employers to $8,000 per placement.
“Our economic plan is about driving all industries forward, not just a few of them.”
He also offered support for women and girls in STEM, and a $300 billion commitment to schools, “a total increase of 63 per cent”. “Funding will be available for projects such as upgrades to libraries, classrooms and play equipment”. Mr Frydenberg announced measures intended to guarantee essential services, look after older Australians, protect the environment and ensure safe communities.
So, there was a lot in it. Whether it can win the imminent election remains to be seen. That it will be a major battleground for the fight to come, is certain.
We encourage you to contact your Walker Wayland AMD advisor if you wish to discuss any aspects of the Budget further.
• The legislated Personal Income Tax Plan will be changed to further lower taxes for individuals, including changes to the low- and middle-income tax offset (LMITO), the low-income tax offset (LITO) and the personal income tax (PIT) rates and thresholds.
• The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2018/19 income year.
• Six more organisations have been approved as specifically-listed deductible gift recipients.
• The instant asset write-off threshold for businesses with an aggregated turnover of less than $10m will be increased to $30,000 for eligible assets that are first used, or installed ready for use, from 7.30 pm (AEDT) on 2 April 2019 to 30 June 2020.
• Businesses with an aggregated turnover of $10m or more but less than $50m will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from 7.30 pm (AEDT) on 2 April 2019 to 30 June 2020.
• The start date of amendments to Division 7A will be delayed by 12 months to 1 July 2020.
• Payments to primary producers in the Fassifern Valley, Queensland affected by storm damage in October 2018 will be treated as exempt income.
• An income tax exemption will be provided for qualifying grants made to primary producers, small businesses and non-profit organisations affected by the North Queensland floods.
• Members of regulated superannuation funds will not have to meet the work test after 1 July 2020 if they are 65 or 66 years of age.
• The restrictions on claiming the spouse contribution tax offset will be eased from 1 July 2020, giving 70 to 74-year-old spouses eligibility.
• The calculation of exempt current pension income will be simplified for superannuation funds from 1 July 2020, allowing a preferred method of calculation and removal of some actuarial certificates.
• Transitional tax relief for merging superannuation funds will become permanent from 1 July 2020. SuperStream will be expanded from 31 March 2021 to include electronic ATO requests for release of superannuation funds and SMSF rollovers.
• An expression of interest process will be undertaken to identify options to support establishment of a Superannuation Consumer Advocate.
• 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.
• The list of countries whose residents are eligible to access a reduced withholding tax rate of 15% on certain distributions from Australian managed investment trusts (MITs) will be updated.
• There will be a one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple eligible for qualifying payments on 2 April 2019 and who are resident in Australia.
• Single Touch Payroll reports lodged by employers will be shared with social security agencies from 1 July 2020.
• Family Tax Benefit eligibility will be extended to the families of ABSTUDY (secondary) student recipients who are aged 16 years and over, and are required to live away from home to attend secondary school.
• From 1 July 2019, net income generated from the forced sale of livestock will be exempted from the Farm Household Allowance payment assessment, when that income is invested into a farm management deposit.
• The HELP debt incurred for recognised teaching qualifications after teachers have been placed in very remote locations of Australia for four years (or part time equivalent) will be extinguished. Indexation on HELP debts of all teachers while they are placed in very remote locations will no longer accrue from 14 February 2019.
Tax Integrity & The Black Economy
• Australian Business Number (ABN) holders will be required to lodge their income tax return and confirm the accuracy of their details on the Australian Business Register annually to retain their ABN status.
• Minor amendments will be made to the hybrid mismatch rules to clarify their operation from 2019.
• The ATO’s Tax Avoidance Taskforce will extend its operations and expand its activities, including increasing its scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes.
• The ATO will receive funding to increase activities to recover unpaid tax and superannuation liabilities with a focus on large businesses and high wealth individuals.
• A dedicated sham contracting unit will be established within the Fair Work Ombudsman to address sham contracting behaviour by some employers.