2019 Australian Federal Budget
2019 Australian Federal Budget – ‘Back in Black’
On Tuesday, 2 April 2019, Treasurer Josh Frydenberg handed down the 2019-20 Federal Budget, his 1st Budget. A stronger economy and secure future were his promise, as he announced a $7.1 billion surplus, tax cuts and extra funding for infrastructure and services to regional Australia 2019/20 Budget.
The Budget surplus would be the first surplus in more than a decade at $7.1 billion in 2021-22 and $9.2 billion in 2022-23. This is a total of $45 billion of surpluses over the next four years. Total revenue for 2019-20 is expected to be $513.8 billion, an increase of 3.6% on estimated revenue in 2018-19. The Government says the economy is forecast to grow by 2.7% in 2019-20 and 2020-21.
With a Federal election looming in May, this is undoubtedly an election budget designed to capture the attention of the voting bloc. The Budget showers tax cuts on two key constituencies including personal tax cuts for low and middle-income earners; and business tax cuts for small and medium-sized businesses; includes incentives for business investment; and spending on infrastructure, health, and welfare.
At present, pollsters are tipping that the government will be unseated by the Australian Labor Party, in which case many budget announcements will not be implemented. However, Labor has said that it will support one-off cash payments and tax cuts for low and middle-income earners, but if elected, will deliver its own major economic statement in the second half of the year.
Overall it appears there are more winners than losers from this Budget, which includes tax cuts, incentives for business investment and spending on infrastructure, health, and welfare.
Here is our summary of the key points from the budget:
Personal tax cuts for low and middle-income earners
The Treasurer announced $158 billion in personal income tax cuts through more than doubling the low and middle-income tax offset from 2018/19 to:
- $1,080 for singles; and
- $2,160 for couples.
This offset will apply for four income years commencing 2018-19. The full tax benefit of $1,080 will apply for those earning between $48,000 and $90,000 pa. Lesser amounts will apply to those at other levels up to $126,000 pa. Overall, this will benefit more than 10 million people earning up to $126,000 a year.
From July 2024, Frydenberg says the government will cut the 32.5% marginal tax rate to 30%. This will cover all taxpayers earning between $45,000 and $200,000 and will mean that 94% of taxpayers will pay no more than 30 cents in the dollar.
He says the top 5 percent of taxpayers will pay one-third of all income tax collected.
Therefore, with the Government’s announced changes, from 2024-25, there would only be three personal income tax rates – 19%, 30% and 45%. From 1 July 2024, taxpayers earning between $45,000 and $200,000 will face a marginal tax rate of 30%.
Small to medium business tax cuts
For businesses with turnover less than $50 million (SMEs), the company tax rate will be reduced to 25% from 2021-22.
Instant Asset Write-Off Increases to $30,000
For small and medium businesses with annual turnover less than $50 million, the instant asset write-off amount will increase from $25,000 to $30,000 for assets acquired after 7.30pm (AEDT) on 2 April 2019.
Previously this offset only applied for businesses with a turnover of less than $10 million, so now applies for an additional 22,000 business. This offset applies on a per asset basis, so eligible businesses will be able to claim the deduction every time they make a purchase under the cap.
Division 7A start date deferred
The government will defer the start date of the proposed amendments to Division 7A of the Tax Act, from 1 July 2019 to 1 July 2020. This is designed to allow for further consultation and to ensure appropriate transitional arrangements.
Extra $60 million for the Export Market Development Grant (EMDG)
The EMDG, which reimburses small businesses for spending on eligible export activity including expenses such as research trips overseas, promotion and advertising etc., will be funded by an additional $60 million.
So for small businesses seeking to expand internationally, there may be additional funding available via this grant to assist.
Skills shortage payments doubled
The Skills Shortage payment introduced in this year’s budget will be doubled to $8,000 per apprenticeship placement.
There were also announcements to create new training hubs, give new apprentices a $2,000 incentive payment, and invest in science, technology and research.
Building and transport industries
The Treasurer announced increased investment in infrastructure spending, to improve rail links and address road black spots, naming several projects in major state capital cities and also rural and regional Australia.
The Urban Congestion Fund will be increased to A$4 billion from A $1 billion, to cut travel times in Australia’s rapidly-growing cities.
The Treasurer promised $2.2 billion for roads, $1 billion to improve freight routes and access to ports and $100 million for regional airports.
People approaching retirement will be able to boost their superannuation balances, with those aged 65 and 66 years able to make voluntary contributions without satisfying the work test, from July 1, 2020. Currently, people aged 65 and older must work a minimum 40 hours over a 30-day period.
The Treasurer said the measure will align the work test with the eligibility age for the Age Pension, due to rise to 67 years from July 1, 2023. About 55,000 people will benefit from the reform.
People aged 65 and 66 will also be able to access the “bring forward arrangements” to make three years’ worth of non-concessional contributions (capped at $100,000) to their super in a single year. This currently stops at 65 years.
The age limit for spouse contributions will be increased from 69 years to 74 years.
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