Considering you're all no doubt nursing budget night hangovers, I thought it might be useful to provide you with a quick summary of the major announcements made during the 2018 budget that might affect you, our readers, just in case you've forgotten what happened last night.
The biggest item in the budget is no doubt the personal tax cuts the government is wanting to bundle in with the company tax rate cuts that have been floundering in the upper house. These cuts start fairly modest, but by the 2024-25 tax year they become quite generous, particularly to high income earners. See the below table reproduced from the AFR.
According to these figures someone earning $100,000 in 2024-25 will save $1,125 a year, someone earning $160,000 will save $3,825 a year and someone earning $200,000 a year will save a whopping $7,225. Generous stuff, but likely to see the light of day (and survive 2 election cycles)? Time will tell.
And what about the rest?
- The instant asset write-off has been extended, again, meaning small businesses can continue to claim a tax deduction for any assets purchased for $20,000 or less. This has been extended through to 30 June 2019 and a 'small business' for the sake of this rule is one that has a turnover of less than $10 million.
- No change to company tax rates for small business, these are still sitting at 27.5% with plans to slowly reduce it down to 25% with the reductions scheduled to take place between 2024-25 and 2026-27.
- They are planning on spending a lot of dough on infrastructure projects, though it mostly seems to be for roads with the bill coming to $4.5 billion. We all know that building more roads reduces congestion ... right?
- Celebrities, sportspeople and others who make money from their image may no longer be able to funnel these earnings via a company or trust structure with the argument being that it is the individual earning it so the individual should be taxed on it. We'll keep a close eye on this one as it may open the door to other types of creative IP being caught in this net.
- The excise rates for craft beer brewers is being reduced to help those who produce little kegs of delicious brews. This is great, but unlikely to result in cheaper beer as the industry has said it'll go back into helping grow the industry. Cheers!
- There's a new cash limit for business transactions of $10,000 in a bid to stamp out tax avoidance which can be achieved by doing "cashies" and not declaring the income.
- Treasury expects to raise an extra $40 million over three years by using tougher laws aimed at stamping out phoenix operations which can only be a good thing. A 'phoenix' company is one that gets wound up without paying it's debts and the business that was carried on in that old company then starts up again in a new company, debt free.
- R&D expenditure will be closely examined to help stamp out those rorting the system. This is great in theory, but is concerning considering the number of legitimate claims already being caught in the "guilty until proven innocent" audit net being cast by the ATO.
- There is $20 million over four years being spent on something called a small and medium entreprise export hubs program that will "enable cooperation and boost export capability of local and regional businesses, through support to develop collective brands, leveraging local infrastructure to scale business operations, and positioning regional businesses to participate in global supply chains". I'm honestly not entirely sure what any of that means.
- Communication & the arts spending, anyone? We've got $48.7 million to celebrate the 250th anniversary of James Cook's voyage (?!), SBS gets $17.6 million (over two years) to produce Australian content whilst the ABC gets a cut of $83.7 million over the next three years, then we have $140 million over three years for the Location Incentive Funding Program to entice foreign film-makers to produce content here in Australia and, finally, we have $14.2 million for an "eSafety commissioner". Not really sure what to make of this package!
- Your online hotel bookings might be set to become more expensive as a result of them now being slugged with GST which one can only imagine will be passed straight on to the consumer.
There were, of course, dozens of other announcements made last night which you can read in great detail here, however we have chosen to focus here on the ones we feel would most appeal to our client base. If this has raised any questions for you, feel free to get in touch. We'd love to help.