2018-19 Federal Budget
The 2018 budget speech was delivered to parliament by the Treasurer at 7.30pm EST on Tuesday, 8 May 2018. budget.gov.au
The budget-in-reply speech was delivered by the Leader of the Opposition on Thursday 10 May 2018.
Spring Parliament Sessions – Bills
[Sept 2018] The following bills associated with announced Budget measures have been introduced to Federal Parliament in the Spring Sittings:
- Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018
- Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018
- Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2018
- Income Tax Rates Amendment (Sovereign Entities) Bill 2018
- Treasury Laws Amendment (Black Economy Taskforce Measures No 2) Bill 2018
- Excise Tariff Amendment (Collecting Tobacco Duties at Manufacture) Bill 2018
- Treasury Laws Amendment (2018 Measures No 5) Bill 2018
Medicare Levy Low Income Thresholds Indexed
- Increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from the 2017-18 income year. The increases take account of recent movements in the CPI.
- The threshold for singles will be increased from $21,655 to $21,980.
- The family threshold will be increased from $36,541 to $37,089.
- For single seniors and pensioners, the threshold will be increased from $34,244 to $34,758.
- The family threshold for seniors and pensioners will be increased from $47,670 to $48,385.
- For each dependent child or student, the family income thresholds increase by a further $3,406, instead of the previous amount of $3,356
Medicare Levy Rate – no change
- Personal Income Tax — retention of the basic Medicare levy rate at 2%
Personal Tax Rate changes from 1 July 2018 through to 1 July 2024
Legislation for these changes has been passed by parliament which includes relevant adjustments for both non-residents and working holiday makers. See the updated tax calculator (free) for 2018-19 here. See also tax rates 2018-19, 2019-20, 2020-21, 2021-22, 2022-23, 2023-24, 2024-25
Details of the announced measures are as follows:
Personal tax cuts in 3 steps, to delivered by way of an annual tax offset, in addition to the existing LITO, and adjustments to the tax rates and brackets in the later years. The adjustments (resident rates) are as follows:
- Step 1: From 1 July 2018 to 30 June 2022 rebate (Low and Middle Income Tax Offset) of up to $530
- up to $200 for taxpayers with taxable income of $37,000 or less
- Between $37,000 and $48,000, the value of the offset will increase at a rate of 3 cents per dollar to the maximum of $530.
- incomes from $48,000 to $90,000 will be eligible for the maximum benefit of $530
- From $90,001 to $125,333, the offset will phase out at a rate of 1.5 cents per dollar.
- Step 2: Bracket creep adjustment measures:
- From 1 July 2018, the Government will increase the top threshold of the 32.5% personal income tax bracket from $87,000 to $90,000
- From 1 July 2022, Low Income Tax Offset increases from $445 to $645 and extend the 19 per cent personal income tax bracket from $37,000 to $41,000
- The increased Low Income Tax Offset will be withdrawn at a rate of 6.5 cents per dollar between incomes of $37,000 and $41,000, and at a rate of 1.5 cents per dollar between incomes of $41,000 and $66,667.
- From 1 July 2022, the Government will further increase the top threshold of the 32.5% personal income tax bracket from $90,000 to $120,000.
- Step 3: Simplifying tax brackets
- 37% tax bracket to be removed. From 1 July 2024, the 32.5% tax bracket will be extended from $120,000 to $200,000
- top marginal tax rate of 45% applied to taxable incomes exceeding $200,000
- the 32.5% tax bracket will apply to taxable incomes of $41,001 to $200,000.
- From 1 July 2019, a 3% annual cap on passive fees charged by super funds on accounts with balances below $6,000 and exit fees to be banned on all superannuation accounts.
- From 1 July 2019, exemption from the work test for voluntary contributions to superannuation, for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements. (Currently, the work test restricts the ability to make voluntary superannuation contributions for those aged 65-74 to individuals who self-report as working a minimum of 40 hours in any 30 day period in the financial year).
- From 1 July 2019 the annual audit requirement for SMSFs will be changed to a 3-yearly requirement funds deemed to have a good
- Individuals with income over $263,157 and multiple employers can nominate that wages from certain employers not be subject to the superannuation guarantee from 1 July 2018. This is to avoid unintended breaches of the $25,000 annual concessional contributions cap from multiple compulsory contributions, and the consequent burden of excess contributions tax with shortfall interest.
- From 1 July 2019 the maximum number of allowable members in SMSFs and small APRA funds will be increased from 4 to 6.
- 2019 personal income tax returns will include a new declaration requirement for claimants of deductions for superannuation contributions. This is intended to address the situation where the required “Notice of Intent” to claim is overlooked, with super funds therefore not taxing the contributions (at the required 15% rate).
- see further: How the Federal Budget 2018 will impact SMSFs
Small business instant asset write-off extended
- The small business $20,000 instant asset write off (accelerated depreciation) will be extended for a further 12 months until 30 June 2019 for businesses with aggregated annual turnover less than $10 million.
- From 1 July 2019 the Pension Work Bonus increased for pensioners from $250 to $300 per fortnight to earn up to $7,800 each year without impacting their pension. Self-employed retirees will also be able to earn up to $300 per fortnight without impacting their pension.
Trusts – Private Companies – Unpaid Present Entitlements Integrity Measures
The Government will ensure that unpaid present entitlements come within the scope of Division 7A of the Income Tax Assessment Act 1936 from 1 July 2019. This will apply where a related private company is made entitled to a share of trust income as a beneficiary but has not been paid that amount, known as an unpaid present entitlement.
High Profile Individuals licensing of fame or image
From 1 July 2019, high profile individuals will no longer be able to take advantage of lower tax rates by licencing their fame or image to another entity.
All remuneration (including payments and non-cash benefits) provided for the commercial exploitation of a person’s fame or image will be included in the assessable income of that individual.
Research and Development tightening of tax incentives
Changes are to be implemented with effect from 1 July 2018.
Companies with aggregated annual turnover of $20 million or more
There will be an R&D premium that ties the rates of the non-refundable R&D tax offset to the incremental “intensity” of R&D expenditure as a proportion of total expenditure for the year.
“Intensity” is the percentage measure of R&D expenditure as a proportion of an entity’s total expenditure.
The marginal R&D premium will be the claimant’s company tax rate plus:
- 4% for R&D expenditure between 0% to 2% R&D intensity;
- 6.5% for R&D expenditure above 2% to 5% R&D intensity;
- 9% for R&D expenditure above 5% to 10% R&D intensity; and
- 12.5% for R&D expenditure above 10% R&D intensity.
The R&D expenditure threshold – the maximum amount of R&D expenditure eligible for concessional R&D tax offsets, will be increased from $100 million to $150 million per annum.
Companies with aggregated annual turnover below $20 million
The refundable R&D offset will be a premium of 13.5% above a claimant’s company tax rate. Cash refunds from the refundable R&D tax offset will be capped at $4 million per annum. R&D tax offsets that cannot be refunded will be carried forward as non-refundable tax offsets to future income years. Refundable R&D tax offsets from R&D expenditure on clinical trials will not count towards the cap.
Expansion of taxable payment reporting systems
In the 2017-18 Budget, the TPRS was extended to the cleaning and courier industries commencing from 1 July 2018.
The taxable payments reporting systems are to be further expanded to include:
- security providers and investigation services
- road freight transport
- computer system design and related services.
The measures for the newly included industries will commence with effect from 1 July 2019, the first financial year report being due by 20 August 2020.
Loss of business tax deductions for PAYG non-compliance
From 1 July 2019 businesses will no longer be able to claim deductions for wages payments where PAYG tax has not been withheld when it should have been.
Likewise payments to contractors will not be deductible if the contractor does not provide an ABN and PAYG has not been withheld when it should have been.
Extending GST to offshore sellers of hotel accommodation in Australia
From 1 July 2019 offshore sellers of hotel accommodation in Australia will be required to calculate their GST turnover in the same way as local
sellers. (Currently offshore sellers of Australian hotel accommodation are exempt from including sales of hotel accommodation in their GST turnover).
Sales that occur before 1 July 2019 will not be subject to the measure even if the stay at the hotel occurs after this date.
The unanimous agreement of the States and Territories will be required for the enactment of legislation.
Inadvertent super cap breaches
Eligible individuals can choose to nominate their wages from certain employers are not subject to the superannuation guarantee from 1 July 2018.
Individuals with more than one employer who expect their income for SG purposes will exceed $263,157 for the financial year will be able to apply for an exemption certificate to release some of their employers from their SG obligations.
- 2018-19 Federal Budget Highlights – CPAA/Wolters Kluwer
- PWC Federal Budget Insights
- Bantacs Budget Summary
- Bentley’s Budget Summary
- Parliament of Australia Library Research Branch – Budget Review series
Pre-Budget News and speculation
- May 8, 2018: Budget 2018: Federal Government to unveil tax cuts worth $10 a week for low and middle-income earners
- May 2, 2018: R&D reform is coming in the budget
- May 2, 2018: Infosheet 10 – The budget and financial legislation
- April 27, 2018: Tax cuts for low and middle earners as budget takings soar, says Scott Morrison
- April 25, 2018: Medicare levy increase designed to deliver $8b to NDIS scrapped ahead of fresh budget
This page was last modified 2018-09-24