The Australian Government’s 2019/20 Federal Budget forms a simple yet strategic economic plan to build a stronger economy and secure a better future for all Australians. Controlled Government spending and the implementation of fiscal policy makes 2019 our first year of surplus since the Global Financial Crisis in 2009. The budget was designed to put Australian tax payers first before big business and multi-nationals, by targeting the essential services that everyday Australian’s rely on. In addition to this, the budget sets up the Australian economy for a more successful future.
The budget provides immediate tax relief for low to middle income earners to ease the current tax burden which hangs over the heads of most Australian taxpayers, by lowing tax rates. The budget also sees the Australian Government helping small to medium sized business by expanding access to the instant asset write-offs which will decrease their tax liability throughout the year. What this means is that for hard working Australians they can have a job and pay their bills, making it easier than ever to save and invest.
MIDDLE TO LOW INCOME TAX OFFSET (MLTO)
In this budget, the government will increase the maximum benefit of the low-to-middle income offset from $530 to $1,080 for singles and a maximum of $2,160 for families for the 2018/19 – 2021/22 income years. Below are some examples of how this will affect an Australian tax payer like yourself.
Hayley is 25 years old, single with no investments and has a taxable income during the 2019/20 financial year of $25,000. When she completes her 2019 tax return, she will receive a low-income tax offset of $255.
Frank is 50 years old, married with an investment property and has a taxable income during the 2019/20 financial year of $90,000 When he completes his 2019 tax return, he will receive the full Middle to low income tax offset of $1,080.
The change will see 4.5 million tax payers benefiting immediately from their hard work and also contributing to a strong economy. The Government’s actions form part of their larger plan to change the tax rates to benefit the majority of Australian taxpayers by lowering the tax rate to 30% for those who earn between $45,000 – $200,000, by 2024.
CHANGES TO COMPANY TAX RATES
The Government is aiming to build a better tax system for Australian business. This budget has provided Australian business with lower tax rates and higher incentives. Australian businesses whose annual turnover is less then $50 Million will be better off as the business tax rate is decreasing to 27 per cent. These changes will benefit around 3.4 million business and around 7.7 million employees.
ABC Pty Ltd has a taxable income of $4.5mil during the 2018/19 income year. Throughout the year, they will be required to pay $1,350,000 in tax. If during the 2019/20 income year, ABC Pty Ltd again has a taxable income of 4.5mil, they will be required to pay $1,237,500 tax. This change reduces ABC Pty Ltd’s tax liability by $112,500.
INSTANT ASSET WRITE OFF’S FOR AUSTRALIAN BUSINESSES INCREASED
The Australian government has continued to befit small to medium business by increasing the instant asset write-off threshold to $30,000. Businesses that purchase assets up to the value of $30,000 can be written off and offset against the business’s assessable income.
Bart is a sole trader and runs a small plumbing business. He purchased a van for $25,000 and a trailer for $9,000. Although the total for both items is $34,000, Bart is able to offset both items against his taxable income as a deduction.
Although major changes are occurring for the next few years, the Australian Government is using taxes to socially engineer our communities and increase the economy by putting money back into tax payer’s pockets. This coming tax time make sure you are best prepared by asking your accountant about the best ways on paying less tax and increasing your refund.