Budget 2018 - Live

The 2018 Budget is being delivered tonight at 7:30pm

Once again, I will be providing a live feed of changes specifically concerning basic tax changes and those affecting property, of course. After basic changes are announced further commentary may be updated and explained. Please understand the changes are a combination of what is said by The Treasurer and also printed material containing more detailed explanation which has also been embargoed until 07:30pm

Winners - Issues that may benefit some taxpayers

• Major tax cuts. Bigger than estimated. $75K pa = $3700+ BUT over 6 years !! Those on $48-$90k income benefit the most with progressive rise in threshold etc being the major issue.
• Medicare levy increase confirmed to not proceed
• $87K thereshold moves to $90K
• 37% tax` bracket to be removed
• Top tax scale threshold rises from $180k to $200k
• Super - Ban exit fees and 3% cap on fees for low ($6K) balances. (Trivial)
• Pensioners to be allowed to earn $300p/wk (was $250) not losing age pension
• Work test to end for super contributions for those 65-74 (Huge benefit)
• Retention of refundable franking (anti ALP policy)
• 20K small business write off extended further year (2019)
• Huge infrastructure spending = jobs
• New ASIC personal identification arrangements. Limits foreign persons, fraud and crime through use of companies.

Tax relief calculator Budget 2018-19 - Tax relief calculator

Losers - Issues taxpayers may not appreciate

• Not a lot. A election budget. Possible cuts to R&D ?
• New migrants have extend wait for support. Now must wait 4 years
• Extended GST net to catch offshore booking sites for AU accomodation so GST is paid. This was previously excluded from the new netflix GST changes.
• New $10k cash transaction law. Transactions over $10k may become illegal. Not sure what ocurs if a legal cash transaction occurs. Perhaps it may be disallowed to the payer ?? and recipient still taxed etc. Obvious a anti avoidance rule may catch multiple smaller payments.
• $10K trap for wages paid in cash and not reported to ATO. Disallowed deductions. eg 7-11 type arrangements. Employers to be subject to a $10k pa total rule, not per employee.
• Expanded contractor reporting to apply to new industries -- IT industry suspected to become the target and others (management and consulting etc).
• Some listed and unlisted investment entities face issues using stapled securities and loans. Complex but may affect some listed structures

Property Specific Issues

• No issues for property investors announced.

 

Map of Infrastructure spend..

 

The infrastructure spend is across the country

 

Some 8 Billion targeted for Victoria is massive

 

Just wondering, they put a total forecast for the years ahead, how we will be in the black by 2021. How accurate were they with last years budget when they forecast the total deficit for this budget? I'm genuinely interested and seeing as you probably know the answer @Paul@PFI I thought it would be easier to ask than look it up. Thanks

 

Think there is an issue for property investors. Will look into the details but they may well have just overturned steeles case.

 

@MikeLivingTheDream

In reference to this?

Steele's Case and Vacant Land

 

Yes i need to see more details but general commentary not positive.

Its looking like back to pre steeles case where such costs are capitalised. Ill see once ive read the budget papers.

 

• Work test to end for super contributions for those 65-74 (Huge benefit)?

Not too sure about huge benefit:

 

Agreed re the work test removal, it may be useful when one partner has a high balance and the other a low balance, but with the recent $1.6M caps, people would have already been taking action to reduce the higher balance and increase the lower balance.

Over 65's also don't have access to the 3 year bring forward rule either so quite restrictive.

You would want to make your contributions prior to using the downsizer rules too.

 

Courtesy of the NTAA. This could be quite significant

From 1 July 2019, the Government will deny deductions for expenses associated with holding vacant residential or commercial land, including interest incurred to finance the acquisition of the land.

Deductions for expenses associated with holding the land will be available once a property has been
constructed on the land, it has received approval to be occupied and is available for rent

Denied deductions will not be able to be carried forward for use in later income years, however, denied deductions can be included in the cost base of the land (but only if the expense qualifies as an element of cost base under the usual rules).

This proposed measure is intended to apply to all entities (e.g., individuals, trusts, companies) however
an exclusion applies for vacant land that is held by an entity that is carrying on a business, which would
include a business of primary production.

 

It's just a huge steaming pile of crap till it gets through the senate.

This current governments record of getting poo through the senate is, well, ****.

 

Yeah. $300K limit is small stuff. But when combined with downsizer contributions maybe a strategy for some

 

I came across this on the news this morning, reverse mortgages for every home owner of over 65.

Federal Budget 2018: Older homeowners offered reverse mortgage to unlock home's equity

This appeals to me as we are about to start selling down some IP's to release capital so we can move to a new PPOR. I've been so torn over it, selling off appreciating assets to fund a non income generating new house but we're at an age now where if we don't do it now, we never will. Part of the reason for investing in the first place was to accelerate us to a point to be able to move house.

We have no kids, any estate left once we pass will be split to extended family nieces & nephews so the idea of being able to reverse mortgage our home when we hit 65 appeals massively.

Does anyone know any further details? Like if you own your home 50/50 with your partner can you reverse up to $12k each per year, or is that a cap per home?

Cheers.

 

Audits for SMSFs every three years welcomed by SMSF Association


The proposal in the 2018 Budget that SMSFs with a good compliance history only have audits every three years has been welcomed by the SMSF Association.


Under the measure, if it is legislated, SMSFs with three years of clear audit reports and timely lodgement of the SMSF Annual Return will go from an annual audit cycle to a three year audit cycle.


SMSF Association CEO John Maroney said the proposal was a fitting reward for SMSF trustees that adhere to the rules, and will cut red tape for the sector. But it is still the position of the Association that an independent audit is essential to the integrity of SMSFs.


“We keenly await the implementation details of the proposal,” he said.

Maroney said the 2018/19 Budget largely left superannuation alone, and this would be an “enormous relief” to SMSF trustees and advisors.


“This continued regulatory stability for SMSFs is welcomed by the Association and is sorely needed as trustees still come to grips with the superannuation tax changes that took effect on 1 July 2017.”

 

I won't get the benefit of a lower tax rate for how many years? (2024_25)

Sure, it's a touchy feely measure but it will benefit those on less than $125,000 for several years. A saving from bracket creep & ip income.

 

Crackdown on claiming tax deductions for personal super contributions
The Government will crackdown on claiming tax deductions for personal super contributions, tasking the ATO with improving the Notice of Intent (NOI) system.

“Currently, some individuals receive deductions on their personal superannuation contributions but do not submit a NOI, despite being required to do so. This results in their superannuation funds not applying the appropriate 15 per cent tax to their contribution. As the contribution has been deducted from the individual’s income, no tax is paid on it at all.”

“The additional funding will enable the ATO to develop a new compliance model, and to undertake additional compliance and debt collection activities.”

 

High-earning employees to be able to nominate to not receive SG
Employees who earn over $263,157 and have multiple employers will be able to nominate that wages from particular employers will not be subject to Superannuation Guarantee, from 1 July 2018.

“The measure will allow eligible individuals to avoid unintentionally breaching the $25,000 annual concessional contributions cap as a result of multiple compulsory SG contributions. Breaching the cap otherwise results in these individuals being liable to pay excess contributions tax, as well as a shortfall interest charge.”

“Employees who use this measure could negotiate to receive additional income, which is taxed at marginal tax rates. Due to this, the measure is estimated to have a gain to revenue of $2.0 million over the forward estimates period through the timing of income tax collection, which is collected sooner than excess contributions tax.”

 

Well flagged in advance:

Increase in SMSF maximum members from 4 to 6
As earlier announced, the Government will increase the maximum number of members an SMSF can have from four to six, from 1 July 2019.

“This will provide greater flexibility for joint management of retirement savings, in particular for large families,” says the Budget papers.

The Budget papers indicate this will also apply to small APRA funds, which wasn’t part of the earlier announcement.

Details are not given on potential changes that may be required in State trust law.