Incentives to hire and retain mature age workers and an extension of the small business instant asset write-offs are some of the subjects that could affect your day-to-day business.
Your employees may also be affected by changes to insurance within super, a ban on exit fees and personal income tax amendments.
Here’s a brief round-up of what last night’s budget means for you and your employees.
Remember that the proposals may change or be withdrawn as the legislation passes through parliament.
Jobs and skills
The government is aiming to make it more attractive for businesses to hire and retain mature age workers, by:
- expanding access to the $10,000 Restart wage subsidy to encourage more businesses to hire and retain mature age workers
- creating a new $2,000 Skills and Training Incentive to support mature age workers to reskill and upskill
- rolling out the Skills Checkpoint for Older Workers program, and
- expanding the Entrepreneurship Facilitators program to support mature age entrepreneurs.
Extending the small business instant asset write-off
The government will extend the $20,000 instant asset write-off by a further 12 months to 30 June 2019 for businesses with aggregate annual turnover of less than $10 million.
Note that small businesses will be able to immediately deduct purchases of assets costing less than $20,000 first used and installed ready for use by 30 June 2019.
Opting in to have insurance in superannuation for certain people
From 1 July 2019, taking out life insurance within superannuation is proposed to change to an opt-in basis for members:
- with low balances of less than $6,000, or
- under the age of 25 years, or
- whose accounts have not received a contribution in 13 months and are inactive.
These changes are intended to make sure retirement savings of young people or those with low balances aren’t unnecessarily eroded by premiums on insurance policies they don’t need or aren’t aware of. They also intend to reduce duplicated cover and make sure individuals do not pay for multiple insurance policies, which they may not be able to claim on.
Affected members will still be able to opt-in to insurance cover within super and will have 14 months from the date they sign up to decide.
Protecting lower super balances and banning exit fees
Exit fees will be banned on all superannuation funds.
A 3% annual cap will also be introduced on all ‘passive’ fees (such as administration and investment fees) charged by superannuation funds with balances below $6,000.
The ATO will also expand its data matching capabilities to reunite any lost super into the client’s active super fund.
Ability to opt out from superannuation guarantee for some high-income earners
Currently, some high-income earners unintentionally breach the $25,000 concessional (before-tax) contribution cap due to the compulsory (SG) contributions being made by multiple employers.
From 1 July 2018, the government will allow individuals to nominate that their wages from certain employers are not subject to SG if they have:
- income in excess of $263,157, and
- multiple employers.
Note that eligible employees may be able to re-negotiate their remuneration package to receive any foregone SG contributions as salary and wages or consider other types of salary packaging benefits.
The government proposes to increase the maximum number of allowable members in new and existing self-managed superannuation funds (SMSFs) and small APRA funds from four to six.
Further, for SMSFs with a history of good record-keeping and compliance, the annual audit requirement will change to every three years. This will apply to SMSFs with a history of three consecutive years of clear audit reports that have lodged the fund’s annual returns on time.
Personal income tax cuts
The government proposes to provide personal income tax cuts over seven years in three steps.
A new Low and Middle Income Tax Offset (LMITO) will be introduced to provide tax relief of up to $530 per year to low and middle-income earners for the 2018-19, 2019-20, 2020-21 and 2021-22 tax years.
This benefit is in addition to the existing Low Income Tax Offset (LITO), currently $445. The savings realised through these offsets will be received following lodgment and assessment of the individual’s tax return.
Neither LITO nor the proposed LMITO is a refundable offset, so while they can reduce an individual’s tax liability to nil, they cannot reduce an individual’s liability to Medicare levy.
From 1 July 2018, the government proposes to increase the upper threshold of the 32.5% marginal tax rate from the current $87,000 to $90,000.
From 1 July 2022, the top threshold of the 19% marginal tax rate will increase from $37,000 to $41,000, and LITO will increase from $445 to $645.
Also, from 1 July 2022, the top threshold of the 32.5% marginal tax rate will increase from $90,000 to $120,000.
From 1 July 2024, the government proposes to increase the upper threshold of the 32.5% marginal tax rate from $120,000 to $200,000, removing the 37% tax bracket completely. As such, the top marginal tax rate of 45% will commence from $200,000.
Note that from 1 July 2024, individuals will pay the top marginal tax rate of 45% when their taxable income exceeds $200,000, and the 32.5% tax bracket will apply to taxable incomes of $41,001 to $200,000.
The Medicare levy remains unchanged at 2% of taxable income (low income exemptions and shade-in rates continue to apply). The 2017 Budget proposal to increase the levy by 0.5% to 2.5% will not proceed.
Medicare levy low income thresholds
The Medicare levy thresholds for low-income singles, families and seniors and pensioners will increase in the 2017-18 income year. The increases are based on movements in the consumer price index (CPI) so that low income earners are generally not liable for the Medicare levy.