2018 Federal Budget - Tax
Written and accurate as at: May 09, 2018 Current Stats & Facts
Personal Income Tax
The tax rates for 2018-19
From 1 July 2018, the Government will increase the top threshold of the 32.5 percent personal income tax bracket from $87,000 to $90,000.
Medicare Levy low-income threshold for families
The Government will increase the Medicare Levy low-income threshold for singles, families and single seniors and pensioners from 2017-18 income year.
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.
Personal Income Tax — income tax exemption for certain Veteran Payments
Veteran Payments and supplementary amounts (such as pension supplement, rent assistance and remote area allowance) of Veteran Payment paid to a veteran, and full payments (including the supplementary component) made to the spouse or partner of a veteran who dies, are exempt from income tax are exempt from income tax.
This measure takes effect from 1 May 2018.
Personal Income Tax — retaining the Medicare levy rate at 2 per cent
The Medicare levy rate will no longer be increased from 2.0 to 2.5 per cent of taxable income from 1 July 2019.
Personal Income Tax Plan
The Government will introduce a seven-year Personal Income Tax Plan over three stages.
Step 1: Targeted tax relief to low and middle income earners
A Low and Middle Income Tax Offset will be introduced. The offset is:
- a non-refundable tax offset
- of up to $530 per annum
- available to Australian resident low and middle income taxpayers
- available for the 2018-19, 2019-20, 2020-21 and 2021-22 income years
- received as a lump sum on assessment after an individual lodges their tax return.
The offset will provide a benefit of:
- up to $200 for taxpayers with taxable income of $37,000 or less
- the value of the offset will increase at a rate of three cents per dollar to the maximum benefit of $530, for taxpayers with taxable income between $37,000 and $48,000
- the maximum benefit of $530 for taxpayers with taxable incomes from $48,000 to $90,000
- the offset will phase out at a rate of 1.5 cents per dollar for taxpayers with taxable incomes from $90,001 to $125,333.
Step 2: Protecting middle income Australians from bracket creep
The top threshold of 32.5 per cent personal income tax bracket will be increased from $87,000 to $90,000.
This measure takes effect from 1 July 2018.
Other measures include:
- LITO will be increased from $445 to $645 (and 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)
- 19 per cent personal income tax bracket will be extended from $37,000 to $41,000
- top threshold of the 32.5 per cent personal income tax bracket will be increased from $90,000 to $120,000.
These measures take effect from 1 July 2022.
Step 3: Ensuring Australians pay less tax by making the system simpler
The 37 per cent tax bracket will be removed entirely:
top threshold of 32.5 per cent personal income tax bracket will be increased from $120,000 to $200,000.
Taxpayers will pay the top marginal tax rate of 45 per cent from taxable incomes exceeding $200,000 and the 32.5 per cent tax bracket will apply to taxable incomes of $41,001 to $200,000.
These measures take effect from 1 July 2024.
Tax
Enhancing the integrity of concessions in relation to partnerships
Partners that alienate their income by creating, assigning or otherwise dealing in rights to the future income of a partnership will no longer be able to access the small business capital gains tax (CGT) concessions in relation to these rights.
This measure will take effect from 7:30PM (AEST) on 8 May 2018.
Extending anti-avoidance rules for circular trust distributions
Anti-avoidance measures will be extended to family trusts engaging in ‘round robin’ arrangements whereby the trusts act as beneficiaries of each other and the distribution is ultimately returned to the original trustee tax free.
This measure will apply from 1 July 2019.
Improving the taxation of testamentary trusts
Concessional tax rates 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. This is to prevent taxpayers from inappropriately obtaining the concession in respect of income on assets unrelated to the deceased estate into the testamentary trust.
This measure will apply from 1 July 2019.
Removing the capital gains discount at the trust level for Managed Investment Trusts and Attribution MITs
Managed Investment Trusts (MITs) and Attribution MITs (AMITs) will no longer be able to apply the 50 per cent capital gains discount at the trust level. This measure will prevent beneficiaries that are not entitled to the CGT discount in their own right from getting a benefit from the CGT discount being applied at the trust level. The measure will not stop the CGT discount applying in the hands of beneficiaries of a distribution from the trust.
This measure will apply from 1 July 2019.
Deny deductions for vacant land
Expenses associated with holding vacant land will no longer be tax deductible. This measure is to ensure no deductions are claimed for vacant land that is not genuinely held for the purpose of earning assessable income.
This measure will take effect from 1 July 2019.
Company Tax - Improving the integrity of the tax treatment of concessional loans between tax exempt entities
Where tax exempt entities become taxable after 8 May 2018, the Government will disallow tax deductions that arise on the repayment of the principal of a concessional loan.
Under this measure, concessional loans that are entered into by tax exempt entities that become taxable will be required to be valued as if they were originally entered into on commercial terms.
Small business - Further extending the immediate deductibility threshold
The $20,000 instant asset write-off will be extended by a further 12 months to 30 June 2019 for businesses with aggregated annual turnover less than $10 million.
Small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019. Only a few assets are not eligible (such as horticultural plants and in-house software).
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool (the pool) and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).