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Treasurer hands down Budget for 18/19 year

Sean Gladwell, Red David Bowie, 2017, acrylic on canvas

Treasurer hands down Budget for 18/19 year

Written by: 
Evan Lowenstein

On Tuesday 8 May 2018 Treasurer, Scott Morrison, handed down the 2018-19 Federal Budget, his third budget. This Budget is most likely to be an election budget (and certainly the last full Budget before the next Federal election). He made the point that the Budget deficit will be $18.2 billion, less than half what it was two years ago and some elements of a strong economic recovery are apparent with stronger growth rates of around 2.75 % which is above the trend for OECD Countries.

Treasury anticipates a return to budget surplus in 2020/2021.

Amongst the highlights of this year’s Budget are:

  • Staged tax relief for low and middle income earners. The Government is proposing a major 7-year 3-step plan to reform personal income tax:

    Step 1 will see a new non-refundable Low and Middle Income Tax Offset from 2018-19 to 2021-22, designed to provide tax relief of up to $530 for each of those years.

    Step 2 will increase the top threshold of the 32.5% tax bracket from $87,000 to $90,000 from 1 July 2018.

    Step 3 from 1 July 2024, the top threshold of the 32.5% bracket will increase from $120,000 to $200,000, removing the 37% tax bracket completely.
     
  • Extending the $20,000 instant asset write-off for small business entities (SBEs) by another 12 months to 30 June 2019. This is the scheme that enables eligible small businesses to write off assets that cost under $20,000 rather than having to depreciate them over the useful life
     
  • Cash payments limit of $10,000 to businesses. This is a measure that is seeking to address holes in the black economy, where the ATO will be policing cash payments to businesses over $10,000. Many questions arise over its enforcement.
     
  • No tax deduction for non-compliant PAYG and contractor payments.
    Measures will be enacted to ensure that taxpayers will not be able to claim deductions for payments to their employees such as wages where they have not withheld any amount of PAYG from these payments, despite the PAYG withholding requirements applying.
     
  • Extension of the taxable payments reporting system (TPRS) to the following industries: security providers and investigation services; road freight transport; and computer system design and related services.

    This is the system that requires payers to these types of industries to list all ABNs and amounts paid to these contractors. These measures are designed to ensure that the amounts of income are correctly reported.
     
  • Super Guarantee opt-out for high-income employees who breach concessional cap
    The Government will allow individuals whose income exceeds $263,157 and have multiple employers to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG) from 1 July 2018.

    In the past this requirement would have meant that these employees would have breached their concessional contribution cap and would  have to pay excess tax on their contributions. This anomaly has been removed.
     
  • SMSF audit cycle of 3 years for funds with good compliance history
    The annual audit requirement for self-managed superannuation funds (SMSFs) will be extended  to a 3-yearly cycle for funds with a history of good record-keeping and compliance.

    The measure will apply to SMSF trustees that have a history of 3 consecutive years of clear audit reports and that have lodged the fund's annual returns in a timely manner. This should result in a lot less costs of compliance and will have the auditors unhappy.

Budget impact on the arts

Looking at the practical implications of how some of these measures affect our clients who are in the creative spheres, for example:

For a lot of our clients who are looking at purchasing a piece of equipment, let’s say a computer  for video graphics or a film maker seeking to purchase a special camera , then it may be useful to take advantage of the $20,000 instant asset write off.

If your  business is in one of the industries such as computer design , then you may be able to take advantage of this concession but the downside is that  you may be subject to the taxable payments reporting system as outlined above .


The arts in General

The 2018/2019 Budget does very little to improve the financial/economic situation of the arts industry.

The Turnbull Government has shown its usual lack of interest in the arts by failing again to reverse the damage wrought on the sector in 2015 by the then Minister for the Arts’ cut of $104.8 million over four years in order to set up his own funding program, known as ‘Catalyst’. This initiative ended but the funds were only partially restored to the Australia Council for the Arts on 1 July 2017, as reported in previous Newsletters.

Notably, Treasurer Scott Morrison’s latest Budget cuts $83.7 million from the ABC over four years, with claims that savings will be redirected to the screen sector; capital works at the National Gallery of Australia (NGA); and also towards commemorations of the Cook 250th anniversary by allocating around $50m to this commemoration.

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