Budget Update 2019 – what you need to know NOW

The Treasurer has delivered the Federal Budget 2019 last night (2 April 2019), he has provided some good news to individual taxpayers and small business owners.

It is worth noting that most of the announcements he made in relation to income tax are related to future income years, there are only two announcements that will take into effect immediately. In this article we go through the ones that are affecting the 2019 financial year only.

Individuals Immediate Relief for Low & Middle Income Earners

What is it about:

The Low & Middle Income Tax Offset “LMITO” is a non-refundable tax offset that benefits individuals where their income is $125,333 or less. It is a non-refundable tax offset that provides tax relief for individuals for the 2019 financial year onwards. The amount of offset received per individual is dependent on their relevant taxable income for the year.

Currently the base amount is $200 per annum, with a maximum relief of $530 per annum. If your income:

• does not exceed $37,000 you are entitled to $200
• exceeds $37,000 but does not exceed $48,000 you are entitled to $200 plus 3% of the amount of the income that exceeds $37,000
• exceeds $48,000 but not $90,000, you are entitled to $530
• exceeds $90,000 you are entitled to $530 less 1.5% of the amount of the income that exceeds $90,000.

Any individuals with income exceeding $125,333 will not be able to benefit from this Offset.

Under the new proposal, the base amount is $255, with a maximum relief of $1,080. If your income:

• does not exceed $37,000 you are entitled to $255
• exceeds $37,000 but does not exceed $48,000 you are entitled to $255 plus 7.5% of the amount of the income that exceeds $37,000
• exceeds $48,000 but not $90,000, you are entitled to $1,080
• exceeds $90,000 you are entitled to $1,080 less 3% of the amount of the income that exceeds $90,000.

Any individuals with income exceeding $126,000 will not be able to benefit from this Offset.

How will it affect you?

Instant Asset Write-Off Amounts increased

Currently small businesses with turnover less than $10 million can claim an outright tax deduction on any business assets purchased that costed $20,000 or less.

There were talks in January 2019 about raising the instant write-off limit to $25,000.

Last night, the Treasurer announced that it will be raised to $30,000 until 30 June 2020, and instant asset write-off will be available to medium sized businesses where they have annual turnover between $10-$50 million.

How will it affect you?

If you are a small business owner with turnover below $10 million, your instant asset write-off amounts are as follows:

If you are a medium sized business owner with turnover between $10-$50 million, you will be able to claim an instant asset write-off for assets costing up to $30,000 from 3 April 2019 to 30 June 2020.  Any assets above this value will have to be depreciated according to the existing rules, they are not eligible to apply the small business pooling rules (like small businesses do).

Word of reminder…

While these are announcements made last night that is applicable to the 2019 financial year, they would still be required to pass the Parliament before they can be enforced and applied. So don’t get too excited to spent $30,000 on a new “work car” just yet.

Edited 5 April 2019:

The Parliament has passed the Bill to extend the instant asset write-off on 4 April 2019.