$20k instant tax write-off extended plus other tax perks
The headline act from this year's budget is the foreshadowed personal tax cuts aimed at lower and middle income earners, and their form has now been revealed.
The benefits will be provided in stages, starting on July 1, 2018 with a new non-refundable low and middle income tax offset of up to $200 for those with taxable incomes of $37,000 or less, increasing to a maximum of $530 at $48,000 and phasing out at higher income levels.
There will also be an increase in the current $87,000 threshold to $90,000, providing a tax cut of up to $135.
From July 1, 2022 the $37,000 threshold increases to $41,000 and the $90,000 to $120,000, while on July 1, 2024 the $120,000 threshold will increase to $200,000, so everyone earning between $41,000 and $200,000 is taxed at 32.5% and the old 37% tax bracket is eliminated completely.
While the current tax cuts seem relatively modest and targeted, the later changes will have a much greater impact.
What we have not seen are any measures aimed at work-related deductions, despite recent comments and activity by the tax office in this area, and speculation about a possible standard deduction limit being introduced.
The government therefore remains committed to allowing deductions for legitimate expenses relating to earning income, and the ATO will continue to focus on identifying excessive or incorrect deductions.
For small businesses the main area of interest was yet another 12-month extension of the $20,000 instant asset write-off until June 30, 2019.
It is also worth noting that the proposed amendments to the Division 7A rules dealing with shareholder loans and payments from private companies, as announced in last year's budget, have been deferred for 12 months until July 1, 2019.
In superannuation, there will be an exemption for the "work test" allowing voluntary contributions by individuals aged 65 to 74 with balances below $300,000 in the first year after they stop working.
A useful measure for high income earners with multiple employers will be an "opt out" from compulsory contributions from one or more employers to reduce the risk of exceeding the annual $25,000 concessional contributions cap.