Publications/ Tax News
BUDGET 2018-19
Tax Time 2019
Changes announced in the 2018–19 Budget
The changes announced in the 2018–19 Budget that are now law, include:
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changes to income tax rate thresholds in the 2018–19, 2022–23 and 2024–25 income years
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a new low and middle income tax offset to reduce the tax payable by low and middle income earners in the 2018–19, 2019–20, 2020–21 and 2021–22 income years
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a new low income tax offset from the 2022–23 income year (to replace both the new low and middle income tax offset and the current low income tax offset).
The following table outlines the rates and thresholds that apply, along with the offset entitlements related to these changes.
Find out about the key changes this tax time, ATO service commitment, what you can do to prepare, and things to consider before lodging to ensure your clients' tax returns are correct and to help prevent delays in processing.
ATO will start full processing of 2018–19 tax returns on 5 July 2019 and expect to start paying refunds from 16 July 2019.
ATO aim to finalise the majority of electronically-lodged current year tax returns within 12 business days of receipt.
Private health insurance statements
From 1 July 2019, health insurers are no longer required to send private health insurance statements. Previously they were required to send statements by 15 July each year, it is now optional to send this information.
Private health insurance information will be available in the pre-fill report, usually by mid-August. If it is not populated by then, taxpayers may need to request a statement from their health insurer.
It is important to correctly report private health insurance information as we use it to calculate:
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private health insurance rebates taxpayers are entitled to
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the Medicare levy surcharge, if applicable.
Low and middle income tax offset
Taxpayers may be eligible for an income tax offset if:
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they are an Australian resident for income tax purposes
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their taxable income is in the appropriate income range.
They do not have to claim this offset. We will work it out for them when their tax return is lodged. If the changes proposed in the 2019–20 Budget become law after 1 July 2019 we will automatically amend assessments – no action will be required by you. The offset can only reduce the amount of tax they pay to zero and it does not reduce their Medicare levy.
New low and middle income tax offset
A new low and middle income tax offset applies for 2018–19, 2019–20, 2020–21 and 2021–22 income years.
Australian resident individuals (and certain trustees) whose income does not exceed $125,333 are entitled to the new low and middle income tax offset. Entitlement to the new offset is in addition to the existing low income tax offset, and is available on assessment after you lodge your income tax return.
If your income:
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does not exceed $37,000 you are entitled to $200
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exceeds $37,000 but does not exceed $48,000, you are entitled to $200 plus 3% of the amount of the income that exceeds $37,000
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exceeds $48,000 but not $90,000, you are entitled to $530
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exceeds $90,000 you are entitled to $530 less 1.5% of the amount of the income that exceeds $90,000.New low income tax offset
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A new low income tax offset applies for 2022–23 and later income years.
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The new low income tax offset replaces both the current low income tax offset and the low and middle income tax offset.
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Consistent with the current low income tax offset, individuals with taxable income that does not exceed $66,667 (as well as certain trustees taxed on behalf of individuals) will be entitled to the new low income tax offset.
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The amount of the new low income tax offset is $645, reduced by:
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6.5% of the amount by which your income exceeds $37,000 but does not exceed $41,000
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a further 1.5% of the amount for income above $41,000.
Income statement
If an employer reports through Single Touch Payroll they are not required to provide a payment summary to their employees.
Income statements will replace payment summaries. Employees can access their income statements through ATO online services via myGov, at any time. Employees will receive a notification from us in their myGov inbox when their income statement is 'Tax ready', so they can complete their tax return.
Employees will be able to contact us for a copy of their income statement if they do not have access to myGov.
Research and development tax incentive amendments
On 8 May 2018, the government announced it would reform the research and development (R&D) tax incentive to encourage additional investment in R&D while ensuring the integrity and fiscal affordability of the incentive. These changes are expected to apply for income years commencing on or after 1 July 2018.
We will accept tax returns as lodged during the period up until the proposed law change is passed by parliament. After the new law is passed, taxpayers will need to review their position and, if required, seek an amendment.
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Hybrid mismatch rules
On 24 August 2018, legislation was passed implementing the Organisation for Economic Cooperation and Development (OECD) hybrid mismatch rules. These rules apply to income years starting on or after 1 January 2019.
However, unless an importing payment is made under a structured arrangement, the imported mismatch rule will apply to income years starting on or after 1 January 2020.
The hybrid mismatch rules prevent entities that are liable to income tax in Australia from avoiding income tax or obtaining global double tax benefits through hybrid mismatch arrangements that exploit differences in the tax treatment of an entity or instrument under the laws of two or more tax jurisdictions.
The rules operate to deny a deduction, or include an amount in assessable income for payments that give rise to a hybrid mismatch outcome.
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Increasing access to company losses
On 1 March 2019, legislation was passed that will supplement the current ‘same business test’ for losses with a more flexible 'similar business test'. The new test will expand access to past year losses when companies enter into new transactions or business activities.
The similar business test allows a company (and certain trusts) to access losses following a change in ownership where its business, while not the same, is similar, having regard to the:
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extent to which the assets that are used in its current business to generate assessable income were also used in its former business to generate assessable income
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extent to which the activities and operations from which its current business is generating assessable income were also the activities and operations from which its former business generated assessable income
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identity of its current business and the identity of its former business
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extent to which any changes to the former business resulted from the development or commercialisation of assets, products, processes, services, or marketing or organisational methods of the former business.
As a test for accessing past year losses, the 'similar business test' will only be available for losses made in income years starting on or after 1 July 2015.
The 'same business test' and the 'similar business test' will be collectively known as the 'business continuity test'.
See also:
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LCR 2017/D6 The business continuity test – carrying on a similar business
Expanding accelerated depreciation for small businesses
Small businesses can claim an immediate deduction for most depreciating assets purchased after 12 May 2015 and first used or installed ready for use for a business purpose:
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from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020, if they cost less than $30,000 each
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from 29 January 2019 and before 7.30pm (AEDT) 2 April 2019, if they cost less than $25,000 each
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before 29 January 2019, if they cost less than $20,000 each.
The balance of the general small business pool is also immediately deductible if the balance is less than $30,000 at the end of an income year that ends on or after 2 April 2019 and on or before 30 June 2020 (including an existing general small business pool).
The 'lock out' laws have also been suspended for the simplified depreciation rules until the end of 30 June 2020. The lock-out laws prevent small businesses from re-entering the simplified depreciation regime for five years if they have opted out.
The instant asset write-off threshold now includes businesses with a turnover from $10 million to less than $50 million. These businesses can claim a deduction for the business portion of each asset that costs less than $30,000 if they are purchased and first used or installed ready for use from 7.30pm (AEDT) on 2 April 2019.
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Downsizer contribution into superannuation
From 1 July 2018, members aged 65 years old or older, and meet all the eligibility requirements may choose to make a downsizer contribution (a new contribution type) of up to $300,000 into superannuation from the proceeds of selling their primary residence. To be eligible, the contract for sale must be entered into on or after 1 July 2018.
If a member makes a downsizer contribution it is reported in the year it is made. The member will need to provide a Downsizer contribution into super form, either before or when they make their contribution.
Downsizer contributions should be made within 90 days of the change of ownership of the dwelling (usually the date of settlement). An extension of time may be granted where there is a delay, but will not be granted to allow the member to meet the age requirement.
Downsizer contributions can be made regardless of contributions caps and other restrictions (age and work test) that may apply when making voluntary contributions.
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First home super saver scheme
If a taxpayer requested the release of an amount under the First home super saver (FHSS) scheme during the 2018–19 income year, they must include in their 2019 tax return:
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any assessable FHSS amount
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the tax withheld amount.
They will receive a payment summary from us showing the assessable FHSS amount and tax withheld.
If they requested a release during the 2018–19 income year, they must include the amount in their 2019 tax return, even if they did not receive the amount until after 30 June 2019.
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Changes to the thin capitalisation rules to prevent double gearing structures
On 5 April 2019, legislation was passed to improve the integrity of the income tax law by modifying the thin capitalisation rules to prevent double gearing structures. Double gearing structures involve the use of multiple layers of ‘flow-through’ entities (such as trusts and partnerships) to issue debt against the same underlying asset.
These changes apply to income years starting on or after 1 July 2018.
The changes will affect entities with interests in trusts (other than public trading trusts) and partnerships, as the threshold for the purposes of the associate entity debt, associate entity equity, and the associate entity excess amounts has been reduced from 50% to 10%.
The changes also affect how the arm’s length debt amount is calculated. To determine both the independent lender and independent borrower amounts of the test, an entity must consider the debt-to-equity ratios of any other entity in which it has an interest.
Extending Instant asset write-off increased and extended.
Let your business clients know about changes to the instant asset write-off.
The threshold has increased to $30,000, and has been extended to 30 June 2020.
The instant asset write-off now also includes businesses with a turnover from $10 million to less than $50 million. These businesses can claim a deduction of up to $30,000 for the business portion of each asset (new or second hand), purchased and first used or installed ready for use from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020.
Businesses with a turnover of up to $10 million can also claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:
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$30,000, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020
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$25,000, from 29 January 2019 until before 7.30pm (AEDT) on 2 April 2019
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$20,000, before 29 January 2019.
Foreign resident capital gains withholding payments - impacts on foreign and Australian residents.
Foreign resident capital gains withholding applies to vendors disposing of certain taxable Australian property. A 12.5% non-final withholding is applied to these transactions at settlement.
The assets subject to the withholding tax are:
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taxable Australian real property with a market value of $750,000 or more
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an indirect Australian real property interest
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an option or right to acquire such property or interest.
Where the seller of these Australian assets is deemed a foreign resident, the buyer must pay 12.5% of the purchase price to the ATO as a foreign resident capital gains withholding payment.
The foreign resident seller can claim a credit for the foreign resident capital gains withholding payment by lodging a tax return for the relevant year.
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Background
Broadly, where a foreign resident disposes of certain taxable Australian property, the purchaser is required to withhold an amount from the purchase price (see note below) and pay that amount to the Australian Taxation Office (ATO).
Note: the legislation specifies that the withholding is actually on the "first element of the cost base". However, as purchase price is understood by vendors and purchasers, and in many instances will equate with the "first element of the cost base", we have used the term purchase price for simplicity.
Annual charge on foreign owners of under utilized residential property.
The vacancy fee is part of the Government's comprehensive housing affordability plan that was announced on 9 May 2017. This measure is intended to encourage foreign owners of residential dwellings to make them available for rent where they are not used as a residence and so increase the number of dwellings available for Australians to live in. The reporting and notification requirements are also expected to provide greater visibility of vacancy rates for foreign owned residential dwellings.
On 30 November 2017 the Treasury Laws Amendment (Housing Tax Integrity) Act 2017 received royal assent. The Act amends the Foreign Acquisitions and Takeovers Act 1975 to require foreign owners of residential dwellings to annually inform the ATO whether the dwelling is residentially occupied or genuinely available on the rental market as a residence for at least six months per year. If the person fails to notify the ATO or notifies the ATO that the dwelling is not residentially occupied or genuinely available on the rental market as a residence for at least six months per year they will be liable for a fee. The fee will be equivalent to the relevant foreign investment application fee for the property at the time it was acquired by the foreign investor.
The obligations under the Act apply to foreign persons who make a foreign investment application for residential property from 7:30PM (AEST) on 9 May 2017. The obligations also apply to foreign purchasers who acquire residential dwellings utilising a New Dwelling Exemption Certificate where the certificate was applied for from 7.30PM (AEST) on 9 May 2017.
Legislation and supporting material
The Treasury Laws Amendment (Housing Tax Integrity) Act 2017External Link received royal assent on 30 November 2017
Limit plant and equipment depreciation deductions to outlays actually incurred by investors.
Income tax deductions for the decline in value of previously used plant and equipment in rental premises used for residential accommodation are no longer allowed. The changes are now law.
The changes apply from 1 July 2017 to:
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previously used plant and equipment acquired at or after 7.30 pm on 9 May 2017 unless it was acquired under a contract entered into before this time
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plant and equipment acquired before 1 July 2017 but not used to earn income in either the current or previous year.
Investors who purchase new plant and equipment will continue to be able to claim a deduction over the effective life of the asset.
The changes do not affect deductions that arise in the course of carrying on a business, or for:
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corporate tax entities
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superannuation plans other than self-managed superannuation funds
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public unit trusts
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managed investment trusts
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unit trusts or partnerships whose members are the above listed entities.
Legislation and supporting material
The Treasury Laws Amendment (Housing Tax Integrity) Act 2017External Link received royal assent on 30 November 2017.
See also:
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Media release No. 86External Link issued on 7 September 2017 by the Treasurer and the Assistant Minister to the Treasurer
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Media release No. 46External Link issued on 9 May 2017 by the Treasurer and the Assistant Minister to the Treasurer
Disallow the deduction of travel expenses for residential rental property.
From 1 July 2017, travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property cannot be claimed as deductions by investors. The changes are now law. The travel expenditure is also not recognised in the cost base of the property for CGT purposes.
You can continue to deduct travel expenditure if:
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the losses or outgoings are necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income; or
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you are an excluded class of entity.
An excluded class of entity is:
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a corporate tax entity;
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a superannuation plan that is not a self-managed superannuation fund;
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a public unit trust;
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a managed investment trust; or
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a unit trust or a partnership, members of which are entities of a type listed above.
Legislation and supporting material
The Treasury Laws Amendment (Housing Tax Integrity) Act 2017External Link received royal assent on 30 November 2017.
See also:
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Media release No. 86External Link issued on 7 September 2017 by the Treasurer and the Assistant Minister to the Treasurer
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Media release No. 46External Link issued on 9 May 2017 by the Treasurer and the Assistant Minister to the Treasurer
Expanding tax incentives for investments in affordable housing.
On 9 May 2017 the Government announced that from 1 January 2018, it will provide an additional ten percentage point capital gains tax (CGT) discount for resident individuals who invest in qualifying affordable housing.
This will increase the CGT discount to 60%.
To qualify for the 60% discount, housing must be provided to low to moderate income tenants, and rent charged at a discount below the private market rental rate.
The Government has undertaken consultation and confirmed that qualifying affordable housing must be managed through a registered community housing provider (CHP) and the investment held for a minimum of three years in aggregate.
CHPs will determine the tenant eligibility criteria, including the rent charged, consistent with state and territory affordable housing policies.
Legislation and supporting material
Legislation is being developed for this measure.
Improving the integrity of GST on property transactions.
On 9 May 2017 the Government announced that it will strengthen compliance with the GST law by requiring purchasers of newly constructed residential properties or new subdivisions to remit the GST directly to the ATO as part of settlement.
Under the current law (where the GST is included in the purchase price and the developer remits the GST to the ATO), some developers are failing to remit the GST to the ATO despite having claimed GST credits on their construction costs. As most purchasers use conveyancing services to complete their purchase, they should experience minimal impact from these changes.
This change takes effect from 1 July 2018.
Lowering of repayment thresholds for higher education and training loans.
On 1 May 2017 the Government announced a range of higher education reforms. This proposal included expanding the current repayment rates and thresholds for higher education and training loans from 8 to 18, commencing 1 July 2018. As part of the proposal, the minimum repayment threshold will be lowered to $42,000 with a one per cent repayment rate.
This measure was further detailed on 9 May 2017 as part of the Government's Federal Budget announcement.
Black Economy Task force - prohibition on sales suppression technology and software.
On 9 May 2017, the Government announced that the manufacture, distribution, possession, use or sale of electronic point of sale (POS) sales suppression technology and software will be prohibited.
Sales suppression technology and software allows businesses to understate their incomes by untraceably deleting selected transactions from electronic records in POS equipment.
Source: Australian Tax office -