It may be the first ever April Budget, the first Budget for rookie treasurer Josh Frydenberg and the first surplus delivered by a Federal Government since Rudd’s reign in 2008 – but will the stars of the show, the personal tax cuts and the extended asset write-offs, deliver the first elected Morrison Government?
The 2019 Budget was handed down on Tuesday 2 April by Treasurer Josh Frydenberg a matter of days before Prime Minister Scott Morrison is due to call the next federal election. With shifting polls and lingering fallout from last year’s leadership coup, this Budget is part-transaction, a deal with the voters to make everyone a winner.
To the Government chant “back in black”, Frydenberg has delivered a surplus, but not as we know it. Officially we are still in the red until the end of 2019-20 when the surplus is forecast to kick in. Surplus or not, we are still saddled with net debt of $361 billion.
Nevertheless, thanks to revenue from the lucky rise in commodity prices (coal and iron ore) – and without raising taxes – the Government has undertaken a targeted box-ticking cash splash, benefiting Labor’s base and marginal voters. This is a political handout full of sweeteners designed to send punters to the election (likely 11 or 18 May) on a high.
The Budget’s big lure is the chance for taxpayers to cash in on the following tax cuts, thanks to an immediate increase in the low and middle income tax offset, when they lodge this year’s 2018-2019 tax return, and those for 2019–2020, 2020–2021 and 2021–2022 income years:
- $1080 (up from $530) for taxpayers with taxable incomes between $48,000 and $90,000
- $255 (up from $200) for taxpayers with a taxable income of $37,000 or less
- cuts phasing out to 3 cents per dollar on taxable incomes of $90,000 to $126,000.
This and the following offerings are subject to legislation being passed by Parliament.
With less immediate effect, the Government proposes to:
- increase the top threshold of the 19% personal income tax bracket from $41,000 to $45,000: from 1 July 2022
- reduce the 32.5% marginal tax rate to 30%, bringing the middle personal income tax bracket more in line with corporate tax rates: from 2024–2025
- abolish the 37% tax bracket in 2024–2025 by which time a projected 94% of Australian taxpayers will be taxed at a marginal tax rate of 30% or less – leaving only three personal income tax rates: 19%, 30% and 45%.
For the 2018–2019 income year, the Medicare levy low-income threshold for singles will be increased to $22,398; for couples with no children, the threshold will be increased to $37,794 and for each dependent child or student it will be increased to $3,471.
As part of the Government’s measure to automate the reporting of those taxpayers receiving income support, those recipients’ employers will be required to report their income every fortnight through Single Touch Payroll (STP).
The small business (aggregated annual turnover of less than $10 million) instant asset write-off has now been extended to medium sized businesses (turnover of $10 million or more, but less than $50 million).
This is a temporary measure that will allow small and medium sized businesses to claim an “instant” deduction of purchases of assets first used, or installed ready for use, from 2 April 2019 to 30 June 2020. The existing threshold of $25,000 will increase to $30,000, and is due to revert to $1,000 on 1 July 2020.
Individuals aged 65 and 66 will now be exempt from the work test (40 hours in any 30 consecutive day period) and able to make voluntary superannuation contributions (both concessional and non-concessional) from 1 July 2020.
Also, the age limit for making spouse contributions will be increased from 69 to 74 years.
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