The Liberal-National Coalition has emerged with a surprise victory following the election, with the promise of lower taxes evidently enough to sway voters. With the vast majority of media coverage leading up to the election focusing on Labor’s proposed tax policies (restricting negative gearing, denying franking credit refunds, taxing trusts at a minimum of 30% and reducing the 50% discount on capital gains to 25%), what does it mean now that we know the Coalition has retained power?
Firstly, they were strongly opposed to Labor’s four core policies mentioned above, so taxpayers don’t need to worry about the issues that were being raised by these policies. Outside of opposing these policies, there wasn’t much that the LNP brought to the election other than what was previously announced, either in their budget on 2 April or prior.
Instant Asset Write-off
The instant asset write-off has been increased and extended. From 2 April 2019, businesses with annual turnover of less than $50 million will be able to claim an outright tax deduction for asset purchases under $30,000 (rather than having to capitalise and depreciate these asset purchases).
Small Business Company Tax Rate
The government will decrease the company tax rate (and the franking rate) for companies with annual turnover of less than $50 million to 26% for the 2020-21 tax year and to 25% from 1 July 2021.
Deferral of Proposed Division 7A Changes
The proposed changes will not be implemented until 1 July 2020 (as opposed to the previously announced 1 July 2019) as there have been many issues raised that need to be addressed before the legislation can be drafted.
ABN holders will be required to meet their income tax return lodgement obligations from 1 July 2021 and confirm the accuracy of their details on the ABN register annually from 1 July 2022, in order to remain an eligible ABN holder.
ATO Tax Avoidance Taskforce
The LNP have announced an extra $1 billion over 4 years for the ATO to undertake additional compliance activities targeting high wealth individuals, trusts and family groups, as well as large public companies and multinationals.
An additional low and middle income tax offset of up to $1,080 will be available for individuals earning up to $90,000, being phased down to nil once your income exceeds $126,000. This offset will automatically be applied upon lodgement of your 2019 income tax return.
Marginal Tax Rates
Individuals earning over $37,000 will see a decrease in their marginal tax rate from 1 July 2022, when the upper limit of the 32.5% tax bracket jumps from $37,000 to $41,000. The 37% bracket limit will increase from $90,000 to $120,000.
From 1 July 2024, the 32.5% rate will fall to 30% and this rate will apply from $41,000 to $200,000. Labor opposes these “high end” tax cuts so the government may find it challenging to have these measures enacted.
Individuals aged 65 or 66 will be able to make voluntary superannuation contributions without having to meet the work test. Further, they will be able to access the “bring-forward” rule, allowing them to contribute up to $300,000 of non-concessional contributions (depending on other factors).
If you are looking for some assistance to navigate the legislations our team are available to guide you. Take this opportunity to get in touch with BLG Business Advisers online or by calling 02 4229 2211.