Seven year personal income tax plan
The Government will introduce a Personal Income Tax Plan over a seven year period that involves 3 steps:
Step 1: 2018-19 to 2021-22
- Introduction of a Low and Middle Income Tax Offset of up to $530pa, in addition to Low Income Tax Offset (LITO), from 2018-19 to 2021-22
- Extend the top threshold for the 32.5% personal income tax bracket from $87,000 to $90,000
Step 2: 2022-23 to 2023-24
- Extend the top threshold for the 19% personal income tax bracket from $37,000 to $41,000
- Extend the top threshold for the 32.5% personal income tax bracket from $90,000 to $120,000
- Increase LITO from $445 to $645
Step 3: 2024-25 and later financial years
- Removal of the 37% personal income tax bracket
- Extend the top threshold for the 32.5% personal income tax bracket from $120,000 to $200,000
Tax integrity measure for testamentary trusts
Effective 1 July 2019
The Government has announced concessional tax rates available for minors receiving income from testamentary trusts will be limited to income derived from assets transferred from a deceased estate or proceeds from the disposal or investment of those assets.
This measure aims to prevent minors from obtaining the benefit of adult marginal tax rates on a higher amount of income by transferring assets that are unrelated to a deceased estate into a testamentary trust.
Retaining the Medicare levy at 2 per cent
Effective 1 July 2019
The Government will not increase the Medicare Levy rate from 2 to 2.5 per cent of taxable income as legislated to commence from 1 July 2019. Consequential changes to other tax rates linked to the top personal tax rate such as the fringe benefits tax rate, will also not proceed.
Increasing the Medicare Levy low-income thresholds
Effective 1 July 2018
The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from the 2017-18 income year.
Extending accelerated depreciation for small businesses
Effective 1 July 2018
The Government will extend the existing $20,000 instant asset write-off by a furt her 12 months to 30 June 2019 for businesses with aggregated annual turnover of less than $10 million. Under this measure, small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 where they are installed and ready for use before 30 June 2019.
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation 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).
Small business CGT concession integrity measure in relation to partnerships
Effective 8 May 2018
The small business CGT concessions will no longer be available to partners that alienate their income by creating, assigning or otherwise dealing in rights to the future income of a partnership. This is a tax integrity measure to stop certain taxpayers, including large partnerships, from accessing these concessions in relation to their assignment of a right to the future income of a partnership to an entity, without giving that entity any role in the partnership.
There are no changes to the small business CGT concessions themselves.
Removing the capital gains discount at the trust level for Managed Investment Trusts and Attribution MITs
Effective 1 July 2019
The Government will prevent Managed Investment Trusts (MITs) and Attribution MITs (AMITs) from applying the 50% capital gains discount at the trust level from 1 July 2019. However, under this measure MITs and AMITs will still be able to distribute realised capital gains that can then be discounted in the hands of the beneficiary.
Deductions denied for vacant land
Effective 1 July 2019
The Government will deny deductions for expenses associated with holding vacant land. The Government says this is an integrity measure to address concerns that deductions are being improperly claimed for expenses, such as interest costs, relating to holding vacant land, where the land is not genuinely held for the purpose of earning assessable income.
Expenses for which deductions will be denied that would ordinarily be included in an asset’s cost base, 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, denied deductions for expenses that would not ordinarily be a cost base element would not be able to be included in the cost base of the asset for CGT purposes.
The Government has confirmed this measure will not apply to expenses associated with holding land that are incurred after:
- 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.
This 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.
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