In his 2018 Budget address, Treasurer Scott Morrison emphasised the need for a stronger economy through 5 key themes, with a continued focus on backing business and providing tax relief to working Australians.
BlueRock welcomes the delivery of the 2018 Budget. From the perspective of privately owned businesses, we would have welcomed:
- the instant asset write becoming permanently available
- comprehensive tax reform, including the encouragement of states to abolish inefficient state taxes, including payroll tax
- a simplification of taxation laws
- a reduction in compliance costs, particularly for privately owned companies
Small businesses should be aware of other key announcements including:
- the prohibition of large cash payments over $10,000 from 1 July 2019
- increased reporting requirements for businesses employing contractors providing security services, investigation services, road freight transport and computer system design
- new anti-avoidance rules involving family trust circular distributions
- new funding of $1.9 billion for new ATO enforcement
In respect of the above announcements, the budget papers have limited analysis and BlueRock will continue to monitor the outcomes because, in our experience, the devil is often in the detail.
In the meantime, we’ve buried ourselves in the budget papers and pulled together the key points that may impact you and your community, with a focus on Tax, Research and Development, Self Managed Superannuation Funds (SMSF) and Finance.
BlueRock welcomes the Treasurer’s announcement that he will introduce legislation to mandate income tax relief for working Australians as well as the endorsement of the planned reduction of corporate tax rates.
But we’re concerned that an unforeseen deterioration in the economy and changes of government policy over the 7-year period may impact the announced income tax relief.
The business income tax relief includes:
- the Treasurer confirming government policy for previously announced company tax rate cuts
- a further 12-month extension to the $20,000 instant asset write off, which will now be available until 30 June 2019
The personal income tax relief will be provided in 3 stages as follows:
Research and development
The Treasurer announced a number of Research and Development (R&D) integrity measures that were mostly focused on larger companies. But we do welcome the Treasurer’s implicit endorsement of R&D activities carried out by small and medium companies.
We also welcome the opportunity to work in partnership with our clients to ensure all regulatory requirements are satisfied.
BlueRock questions the impact on companies undertaking R&D activities if the ATO is granted new powers to publicly disclose the details of R&D claimants.
The proposed changes to R&D policy include:
- a fluctuating R&D offset rate, for companies with a turnover of more than $20 million per year, which changes depending on R&D expenditure as a proportion of total expenditure
- a new $4 million cap on the refundable R&D offset for companies with an annual turnover of less than $20 million
The Treasurer announced a number of superannuation policy changes, effective 1 July 2019, including:
- Self Managed Superannuation Fund (SMSF) audits to be every 3 years
- the number of members increasing from 4 to 6 for SMSFs
- the prohibition of exit fees when a fund member changes super funds
- ATO superannuation consolidation program
- allowing employees earning more than $263,157 to choose which employers have to pay them the Superannuation Guarantee Charge (from 1 July 2018)
- the work test being refined to include exemption for eligible persons over 65
Important age pension measures to note are:
- the expansion of the Pension Work Bonus from 1 July 2019, which will increase to $300 per fortnight from the current $250 a fortnight
- the expansion of the Pension Loans Scheme to all Australians who are of pension age
In the world of finance, the Budget 2018 outcomes won’t have a material impact on where debt levels and financial markets are heading. But there’s a few things worth noting.
The Reserve Bank Australia (RBA) is expected to start removing emergency low rates by late 2018 (possibly early 2019) with more rises to come. The RBA is still seeing a lot of risks given low real wage growth, high utility prices, and falling/flat house prices in the face of high household debt levels.
However, the labour market is strengthening and wages should increase marginally, which may improve confidence and discretionary spending and allow for rate rises.
Budget 2018 made no further changes to the ‘First Home Super Saver Scheme’, which allows First Home Buyers the ability to put pre-tax contributions into their super fund for the specific purpose of saving for their first home, up to a $30,000 cap ($15,000 per year). This policy commences on 1 July 2018 after a year of not being active following the Budget 2017 announcement.
For more information on any of the above, please get in touch with your BlueRock advisor who’ll be happy to discuss how Budget 2018 might affect you and your business.