Several tax changes apply in the 2018/19 income year. A brief summary is provided in this newsletter. There may be some advantages in acting on some of these items before 30 June 2019. If you think any of these changes may affect you, please contact us for more details
Business Income and Expenses
Subject to cash flow requirements, consider deferring income until after 30 June, especially is you expect lower income for 2019/20 compared to 2018/19.
Most business are taxed on income when it is invoiced. Some small businesses may be taxed only when income is received. Income from construction contracts is generally taxed when progress payments are invoiced or received.
Ensure that you have complied with the requirements to claim deductions in 2018/19:
“The small business instant asset write-off for assets costing less than $20,00 has been extended until 30 June 2019”
Small businesses planning major purchases or replacement or capital equipment should contact us for advice. Careful timing of those transactions can result in substantial tax savings.
Scrap any obsolete item in the asset register before 30 June. Consider delaying sale of assets that will realise a profit on sale and bring forward if it will be a loss.
Review valuations of trading stock in the lead up to 30 June. Best practice is generally to value stock at the lower of cost or market selling value.
This may change if you expect a tax loss for 2018/19, or substantially higher income in 2019/20 compared to 2018/19.
Personal Income, Deductions and Tax Offsets
Subject to cash flow requirements, set terms deposits to mature after 1 July, rather than before 30 June.
Consider realising capital losses if you have already realised capital gains on other assets during 2018/19. Conversely, consider realising capital gains if you have unrecouped capital losses, or you expect substantially higher income in 2019/20 compared to 2018/19.
If you expect lower income in 2019/20 due to retirement or any other reason, consider deferring income until after 1 July, when you will be in a lower tax bracket. If you are a primary producer and you expect a permanent reduction in income, consider withdrawing from the income averaging system.
Arrange for deductible donations to be grouped in the higher income year, if you expect substantially higher or lower income in 2019/20 compared to 2018/19. Make all donations in the name of the higher income earner.
2018/19 is the last year that individuals can access the Net Medical Expenses Tax Offset for medical expenses relating to disability aids, attendant care or aged care.
Other Tax Planning Considerations
Contact us for advice if your have moved to or from Australia for an extended period. You may need to review your residency status for tax purposes. There are important tax consequences if you change residency.
Trustees of trusts should ensure that all necessary documentation is completed before 30 June, especially where you intend to stream capital gains or franked distributions to specific beneficiaries or have beneficiaries who aren’t the default beneficiaries.
Family discretionary trusts may need to make a family trust election if the trust has unrecouped losses, or has beneficiaries whose total franking credits for the year may exceed $5,000.
Be sceptical of year-end tax shelter schemes. You should not enter a scheme without advice regarding both its tax consequences and commercial viability.
Single Touch Payroll
Subject to certain exemptions, the Single Touch Payroll reporting framework applies from 1 July 2018 for a substantial employer (entity with 20 or more employees or a member of a wholly-owned group with 20 or more employees).
Tax Rate
For the 2018/19 year eligibility for the reduced corporate tax rate of 27.5% has been changed to apply to base rate entity companies with an aggregated turnover of $50m.
The small business income tax offset remains the same, which is 8% discount of the income tax payable on the business income received from a small business entity (other than a company) wtih aggregated turnover of less than $5m, up to a maximum of $1,000 a year.
Accelerated Depreciation
An immediate deduction is still available for an asset costing less than $20,000 acquired and first used or installed ready for use on or before 30 June 2019.
The balance of the general small business pool is also immediately deducted if the balance is less than $20,000 at 30 June.
Tax Rate
“The threshold for the 32.5% tax bracket has been increased from $87,000 to $90,000 for the 2018/19 year”
Low and Middle Income Tax Offset
Australian resident individuals whose income does not exceed $125,333 are entitled to the new low and middle income tax offset
Child Care Subsidy
From 2 July 2018, a new Child Care Subsidy is available for families where both parents work
GST on New Residential Premises
From 1 JUly 2018, purchasers of new residential premises or new subdivisions of potential residential land must withhold an amount equivalent to the GST from the contract price
Personal Superannuation Contributions
Individuals with a total superannuation balance of less than $500,000 will be able to make catch-up superannuation contributions using their unused concessional contributions cap. The unused concessional contributions cap can be accessed on a rolling basis for five years.
First Home Super Saver Scheme
From 1 July 2018 individuals may apply to release any voluntary contributions made into their super fund to assist with purchasing their first home
Downsizer Contributions
Individuals who are 65 years old or older and meet the eligibility requirements can choose to make a downsizer contribution of up to $300,000 from the proceeds of selling their main residence into the superannuation
Salary Sacrifice
Legislation to prevent employers from using employee salary sacrificed amounts to reduce their minimum superannuation guarantee is currently before Parliament
Super Guarantee Non-Compliance
Subject to the passage of legislation, from 24 May 2018 to 23 May 2019, there will be a one-off 12-month amnesty period to encourage employers to self-correct past super guarantee non-compliance without penalty
Small Business CGT Concessions
Be aware of the proposed additional basic condition for the small business CGT concessions if the CGT event involves certain rights or interest in relation of the income or capital of a partnership
FBT Rate
The FBT rate for the year ending 31 March 2019 is 47%
The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
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