3P ACCOUNTING & TAX END OF FINANCIAL YEAR UPDATE 2018

With the New Financial Year upon us and the result of the 2018 Federal BUDGET now known, we are delighted to provide you with the latest updates presented by NTAA as a result of the recent Federal Budget, with a little more certainty around some of the outcomes as well what to look out for in the new financial year.

Below is a summary of all the latest updates.  Click here for a more detailed analysis.

Personal Income Tax Changes

Personal Income Tax Plan

The Government will introduce a seven-year, three-step, Personal Income Tax Plan

Changes to the Medicare levy low-income thresholds

The Government will increase the Medicare levy low-income thresholds for singles, families, and

seniors and pensioners from the 2018 income year

Changes affecting business taxpayers

Extending the $20,000 immediate write-off for small business

The Government will extend the $20,000 immediate write-off for small business by a further 12-months to 30 June 2019 for businesses with aggregated annual turnover less than $10 million.

Removing tax deductibility of payments where withholding obligations have been disregarded

From 1 July 2019, businesses will no longer be able to claim a deduction for wages and contractors in certain circumstances.

Introduction of an economy-wide cash payment limit

From 1 July 2019, the Government will introduce a limit of $10,000 for cash payments made to

businesses for goods and services.

Expanding the contractor payment reporting system

The contractor payment reporting system was first introduced in the building and construction industry and extended to the cleaning and courier industries from 1 July 2018.

 

Superannuation related changes

Exemption from the work test for voluntary contributions

From 1 July 2019, the Government will introduce an 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.

Three-yearly cycle for some SMSFs

From 1 July 2019, the Government will change the annual audit requirement to a three-yearly

requirement for SMSFs with a history of good record-keeping and compliance.

Increasing the maximum number of allowable members in an SMSF and small APRA fund

From 1 July 2019, the Government will increase the maximum number of allowable members in new and existing SMSFS and small APRA funds from four to six.

Preventing inadvertent concessional cap breaches by certain employee

From 1 July 2018, the Government will allow individuals whose income exceeds $263,157, and who have multiple employers, to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG).

Deductions for personal contributions

The Government intends to improve the integrity of the ‘notice of intent’ (‘NOI’) processes for claiming personal superannuation contribution tax deductions.

Capping passive fees, banning exit fees and reuniting small and inactive superannuation accounts

From 1 July 2019, the Government will introduce a 3% annual cap on passive fees charged by superannuation funds on accounts with balances below $6,000 and will ban exit fees on all

superannuation accounts.

 

Changes to insurance in superannuation

The Government will change the insurance arrangements for certain superannuation members.

Insurance within superannuation will move from a default framework to an opt-in basis.

Changes affecting companies

Division 7A Changes

From 1 July 2019, the Government will ensure that unpaid present entitlements (‘UPEs’) come within the scope of Division 7A of the ITAA 1936. 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.

Reforms to combat illegal phoenixing

The Government will reform the corporations and tax laws and provide the regulators with additional tools to assist them to deter and disrupt illegal phoenix activity.

Research and development tax offset

The Government will amend the research and development (R&D) tax incentive to better target the program and improve its integrity and fiscal affordability with effect from 1 July 2018.

Changes affecting trusts

Improving the taxation of testamentary trusts

From 1 July 2019, the concessional tax rates available for minors receiving income from testamentary trusts will be limited to income derived from assets that are transferred from the deceased estate or the proceeds of the disposal or investment of those assets.

Extending anti-avoidance rules for circular trust distributions

From 1 July 2019, the Government will extend a specific anti-avoidance rule to family trusts that applies to other closely held trusts that engage in circular trust distributions.

Other income tax changes

Deductions denied for vacant land

From 1 July 2019, the Government will deny deductions for expenses associated with holding vacant residential or commercial land, including interest incurred to finance the acquisition of the land.

GST Changes

Extended GST to offshore sellers of hotel accommodation

From 1 July 2019, the Government will extend the GST by ensuring that offshore sellers of hotel

accommodation in Australia calculate their GST turnover in the same way as local sellers.

Other important announcements and changes

Removing the CGT discount at trust level for Managed Investment Trusts

From 1 July 2019, the Government will prevent Managed Investment Trusts (‘MITs’) and Attribution MITs (‘AMITs’) from applying the 50% capital gains discount at the trust level.

*Compliance activities targeting individuals and their tax agents*

The Government will provide $130.8 million to the ATO from 1 July 2018 to increase compliance

activities targeting individual taxpayers and their tax agents. This is a significant announcement and will increase the focus and audit activity from the ATO significantly in the new financial year. It is now more important than ever to ensure you are prepared and have all your records together for tax time.

Income tax exemption for certain Veteran Payments

From 1 May 2018, the Government exempted certain Veteran Payments from income tax.

Tightening concessions for foreign investors

The Government will introduce a package of measures to address risks to the corporate tax base posed by stapled structures and similar arrangements.

If you have any questions or would like to discuss this further, please contact our office to arrange an appointment.