New in Budget 2018: Small Business and Individuals

Some changes in new Budget, 2018, for small business and individuals.

1. Medicare will remain 2%.
2. Work related deductions will remain same;
3. $20000 instant asset write off deductions for capital assets acquired by small business will remain until 30 June 2019. From 01/07/2019 it will revert to $1000.00;
4. As part of personal income tax plan, to introduce a low and middle-income tax offset (effective from 1 July 2018, to help those on low and middle incomes to provide relief from bracket slink to remove the 37% tax bracket altogether;
5. Black economy highly targeted to crackdown;
6. Tax deductions for owners of vacant land restricted;
7. No changes in negative gearing;
8. No major GST changes.

Tax rates and thresholds for 2017-18 unchanged

The rates for the 2017-18 year (excluding the 2% Medicare levy) remain unchanged and are:

Foreign resident tax rates 2017–18

Foreign residents are not required to pay the Medicare levy. The temporary budget repair levy ceased applying from 1 July 2017.

Working holiday makers

These rates apply to working holiday maker income regardless of residency for tax purposes.

You are a working holiday maker if you have a visa subclass:

• 417 (Working Holiday)
• 462 (Work and Holiday).

Working holiday maker tax rates 2017–18

The temporary budget repair levy ceased applying from 1 July 2017.

Income tax rates for people under 18

Special rules apply to income earned by people under 18 years old. Under these rules, certain types of income, such as a distribution for a family trust, may be taxed at a higher rate.

If you are under 18 years old, some of your income may be taxed at a higher rate than an adult.

However, you pay the same individual income tax rates as an adult for:

1. all income you receive if you are an ‘excepted person’ – this may apply if you have finished full-time study and are working full time, have disabilities, or are entitled to a double orphan pension
2. income you receive as ‘excepted income’ – this includes your employment or business income, Centrelink payments and income from a deceased person’s estate.

If you are not an excepted person, you pay a different rate of tax for income that is not excepted income. This rule was introduced to discourage adults from diverting income to their children.

Black economy highly targeted to crackdown;

In an attempt to curb tax avoidance in the cash economy, the Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services. This measure will require transactions over this threshold to be made through an electronic payment system or by cheque.

Taxable Payment Annual Summary

The taxable payments reporting system (TPRS) will be expanded to the following industries from 1 July 2019:

1. security providers and investigation services
2. road freight transport, and
3. computer system design and related services.

vacant land DEDUCTIONS to be denied

From 1 July 2019, tax deductions will not be allowed for expenses associated with holding vacant land. This is claimed to be an integrity measure to address concerns that deductions are being improperly claimed for expenses, such as interest costs related to holding vacant land where the land is not genuinely held for earning assessable income. The government says that it will also reduce tax incentives for land banking, which deny the use of land for housing or other development.

The measure will apply to land held for residential or commercial purposes. However, the “carrying on a business” test will generally exclude land held for commercial development.

Deductions that are denied will not be able to be carried forward for use in later income years. Expenses for denied deductions that would ordinarily be a cost base element (such as borrowing expenses and council rates) may be included in the cost base of the asset for capital gains tax (CGT) purposes when sold. However, deductions denied for expenses that would not ordinarily be a cost base element would not be able to be included in the CGT cost base.

The measure will not apply to expenses associated with holding land that are incurred after:

1. a property has been constructed on the land, it has received approval to be occupied and is available for rent, or the land is being used by the owner to carry on a business, including a business of primary production.

$20,000 instant asset write off extended UNTIL 30 JUNE 2019

The write-off threshold of $20,000 has been extended to 30 June 2018. If you buy an asset and it costs less than $20,000, you can immediately deduct the business portion in your tax return. The $20,000 threshold applied from 12 May 2015 and will reduce to $1,000 from 1 July 2018. You are eligible to use simplified depreciation rules and claim the immediate deduction for the business portion of each asset (new or second hand) costing less than $20,000 if:

1. you have a turnover less than $10 million (increased from $2 million on 1 July 2016), and
2. the asset was first used or installed ready for use in the income year you are claiming it in.

Assets that cost $20,000 or more can’t be immediately deducted. They will continue to be deducted over time using the general small business pool. Your write-off the balance of this pool if the balance (before applying any other depreciation deduction) is less than $20,000 at the end of an income year.

Remember, registered tax agents and BAS agents can help you with your tax, contact Bashar of Reconciled Business Accountants for more information.