2018 Budget Summary by Flor-Hanly

Jun01

2018 Budget Summary by Flor-Hanly

Flor- Hanly - Friday, June 01, 2018

2018 Budget Summary by Flor-Hanly


The government handed down the 2018 budget on Tuesday night and as usual there are winners, losers and for some it was neither. The following is a brief summary of the budget and potential impact on our clients and generally.


BudgetBusiness owners generally


The $20,000 instant asset write-off allowing small businesses to claim an upfront deduction for eligible items of plant and equipment has been extended to 30 June 2019. This was due to finish 30 June 2018 and there had been thoughts it may drop back to $10,000. Many commentators rightly believe this should be a permanent measure.

Primary Producers

Unfortunately, there was no further drought relief to support farmers in affected areas and no clear plan announced to deal with another major drought. This is hard to understand as the government announced increased funding of $338 million for mental health services for Australians including those in regional and rural areas. With drought and its impact on farmers and the associated community being a major factor in depression and suicide one would have thought that that the funding would be better spent on having effective drought management planning in place to alleviate the impact of drought on the mental health of rural and regional Australians.

The Government has promised $161 million over four years to improve satellite navigation including to areas without mobile phone coverage however there is no new funding to fix mobile blackspots in regional Australia.

The budget also announced $6.3 million in funding to assist farmers access a wider range of agricultural and veterinarian chemicals – this is an extension to the program that commenced in 2014.
Funding of $51.3 m was announced to ensure growth and competitiveness in agriculture and food exports including the creation of 11 agricultural counsellors to facilitate trade links.

Older Australians

Pensioners will now be able earn more money without impacting their pension under the Pension Work Bonus Scheme. The current earnings cap is $250.00 per fortnight – this will be increased to $300.00 a fortnight or potentially $1,300 extra a year. Whilst this is welcome an increase to the pension itself would have been more effective.

Older Australians retiring will also be able to take advantage of a relaxed work test to increase their super balance. Under current rules anyone aged between 65 and 74 can make super contributions as long as they have met the work test of 40 hours in any consecutive 30-day period.

If you are aged 65 or more retire on 30 June and receive a payout of entitlements, then effectively this curtails you from making a contribution in early July as you have not met the test. The proposed measure will provide a one-year exemption from the work test and will allow individuals with superannuation balances below $300,000 to make voluntary contributions to super for 12 months from the end of the financial year they last met the work test. If eligible there is no requirement to remain under the $300,000 balance cap for the duration of the 12-month period. Existing annual concessional and non-concessional caps of $25,000 and $100,000 respectively will apply.

The pension loan scheme allowing older homeowners over 65 to access the equity on their home via a reverse mortgage of up to $11,799 per year has been extended to all eligible pensioners. Previously this was available just to part pensioners. The loan is repaid when the home is sold and loan to value limits exist to prevent borrowers owing more than the value of their property.

Superannuation

The relaxation of the work test for 12 months as previously noted is a winner for people able to take advantage of it.

Currently Self-Managed Super Funds have a limit of four members. The budget announced that this can be increased from four to six from 1 July 2019. This may be beneficial for families wanting to include more adult children in their fund.

Exit fees will be banned on all super accounts regardless of the balance. This will save money for those people switching funds. Further to this, a change was announced that will stop superfunds charging people under 25 or with low super balances for life insurance policies they have not asked for or do not require.

Tax

People earning up to $37,000 per year will have their tax reduced by up to $200.00 a year by way of an increased tax offset rather than a weekly reduction in tax withheld. This can be claimed when your tax is prepared for the 2018/19 year.

Australians earning $37,000 to $48,000 a year will be able to claim a maximum of $530.00 per year via the same tax offset.

Effective from 1 July 2019 people earning between $87,000 and $90,000 will drop back to the lower tax bracket of 32.5% instead of 37% as it currently stands.

This is all part of the Government plan to abolish the 37% tax bracket by 2024-25 assuming it is re-elected in the interim and legislation passes. The plan is to apply the 32.5% tax bracket to those earning between $90,000 and $120,000 by 2022-23 and by 2024-25 to people earning up to $200,000. Currently anyone earning between $87,000 and $180,000 pays 37% on income in this bracket and 47% on income above $180,000.

There was good news with the canning of the proposed increase to the Medicare levy from 2% to 2.5% that was due to come into effect from 1 July 2019. This was to ensure full funding of the National Disability Insurance Scheme. This will now be funded from the budget generally.

Generally

A $75 billion 10 year rolling infrastructure plan was announced with only $24.5 billion to be spent over the next four years across the country. For QLD $5.2 billion was announced for the Bruce Highway however at closer scrutiny this all appears to be projects in the south east corner.

In a move targeting the cash economy a $10,000 cash payment limit will be introduced economy wide. From 1 July 2019 cash payments of more than $10,000 made to businesses for goods and services will be banned. Such transactions have to be made by electronic transfer or cheque however transactions with financial institutions or between individuals will not be affected. It is hard to see how this will stop a tradie building a fence for someone for a lower cash payment and not declaring it if the customer is happy to do so.

This is just a summary of a number of the key points in the budget. If you have any specific queries on the above or any other aspect of the budget please feel free to contact the team at Flor-Hanly in Mackay on 07 4963 4800.




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