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Treasurer Serves Up a Budget for Battlers, Baby Boomers and Craft Beer Brewers - but Businesses set to face further scrutiny

08 May 2018

BDO Tax Partner Mark Molesworth has responded to the release of the 2018-19 Federal Budget stating that the Treasurer had served up a budget for battlers, craft beer brewers, and baby boomers.

“Tax cuts for low to middle income earners, assistance to help older people to stay in their own homes for longer and the abandonment of any increase in the Medicare levy is a win for many Australians,” Mark said.

“There are some head-line grabbing sweeteners in the budget such as:

  • From 1 July 2018 a $530 non-refundable tax offset for low to middle income earners up to taxable income of up $125,333
  • 60% excise refund for domestic craft beer brewers – refund cap extended from $30,000 to $100,000, which should make it easier for local craft brewers to compete with the large international owned brewers.
  • $20,000 instant asset write-off for small businesses extended to 30 June 2019.”

“But for workers and those who are self-employed it looks like further scrutiny lies ahead with a crackdown on the cash economy with the introduction of a$10,000 cash payment limit for business transactions with transactions having to be made through electronic payment or cheque.”

“To help shutdown the black economy, the Government also announced measures that will specifically focus on the security and road freight transport industries.

“It looks like security guards and truck drivers will join couriers and cleaners in being put under the spotlight,” Mr Molesworth said.

“As part of the Black Economy Crackdown from 1 July 2019, the government will target employers who pay wages without deducting Pay As You Go (PAYG) contributions by making the wages non-deductible.”

Winners

  • Older Australians – package to assist the elderly to receive aged-care services to stay at home longer and an increase in the Work Bonus Scheme which allows age pensions to work part-time and earn $250 a fortnight before losing any pension.
     
  • Low to middle Income Earners on less than $125,333 to be targeted for immediate tax relief – tax cut via a new Low and Middle Income Tax Offset and the abandonment of any increase in the Medicare levy.
     
  • Craft Beer Brewers – 60% excise refund for domestic craft beer brewers
     
  • The ATO – more funding announced: $133.7m for debt collection for tax and superannuation debts; $318.5m to implement the new Black Economy strategies and $130.8m to increase compliance activity on individuals and their tax agents to deter over claiming of entitlements by high risk taxpayers and their agents.
     
  • Small – Medium Businesses: Instant Asset Write-Off extension – firms with a turnover of up to $10m can claim tax deductions on all equipment worth less than $20,000
     
  • Infrastructure Boost across Australia
    a) Queensland -  M1 - $1bn for extra lances between Brisbane and the Gold Coast;
    Bruce Highway - $800m for upgrades; Sunshine Coast rail network - $390m to upgrade existing infrastructure
    b) Victoria - Melbourne Airport Rail link - $5bn for link between Airport and CBD
    c) NSW - Coffs Harbour $971m Bypass; $50m to support North South Rail line business case for Western Sydney and Shoalhaven River Crossing - $155m
    d) WA - $3.2bn for project including Perth Metronet rail, roads, water and hospitals
    e) SA - $177m to connect the South Road Superway to the Torrens to Torrens project

Losers

  • Middle to High Income Earners – no significant tax relief until 2023
     
  • Owners of Vacant Land
    Deductions will be denied for expenses associated with holding vacant land. Integrity measures introduced for expenses, such as interest costs, related to holding vacant land, where the land is not held for the purpose of carrying on a business.
     
  • Celebrities and High profile individuals (such as sportspeople and actors) will no longer be able to licence their fame or image to another entity. They can currently licence their fame or image to a related company or trust to take advantage of lower tax rates.
     
  • Start-ups and Innovation Companies who rely on R&D concessions – these concessions are being limited. 
    • Companies with over $20m turnover
    • The R&D incentive will tie the rate of non-refundable offset to the incremental intensity of R&D. The marginal R&D rate will be the company’s tax rate plus: 4 percentage points for R&D expenditure between 0 per cent to 2 per cent R&D intensity; 6.5 percentage points for R&D expenditure above 2 per cent to 5 per cent R&D intensity; 9 percentage points for R&D expenditure above 5 per cent to 10 per cent R&D intensity; and 12.5 percentage points for R&D expenditure above 10 per cent R&D intensity.
    • R&D expenditure cap increased from $100m to $150m per annum.
    • For companies under $20m turnover the refundable R&D offset will be a premium of 13.5% above the claimant’s tax rate. Cash refunds limited to $4m per annum – any balance can be carried forward as non-refundable offsets. Refundable offsets on clinical trials will not count towards the cap.