May 2019 update
2019/20 Budget Update
The Government handed down the 2019/20 Federal Budget on Tuesday 2 April 2019.
Some of the important proposals include:
- Increasing and expanding access to the instant asset write-off from 7:30 pm (AEDT) on 2 April 2019 (i.e., ‘Budget night’) until 30 June 2020, as follows:
- Allowing individuals aged 65 and 66 years to:
- Increasing the upper threshold of the 19% personal income tax bracket to $45,000 from 1 July 2022, and reducing the 32.5% marginal tax rate to 30% from 1 July 2024 (in addition to changes already legislated).
- Increasing the Low and Middle Income Tax Offset (‘LAMITO’), with effect from the 2019 income year, to provide tax relief of up to $1,080 per annum, as well as an increased base amount of $255 per annum.
– Increasing the instant asset write-off threshold from $25,000 to $30,000.
– Making the instant asset write-off available to medium sized businesses (with aggregated annual turnover of $10 million or more, but less than $50 million).
– make voluntary superannuation contributions (both concessional and non-concessional)
without meeting the work test from 1 July 2020; and
– make up to three years of non-concessional contributions under the bring-forward rule (without satisfying the work test).
New industries entering the taxable payments reporting system
The ATO has reminded businesses that provide road freight, information technology (‘IT’), security, investigation, or surveillance services that they need to lodge a Taxable payments annual report (‘TPAR’) each year to tell the ATO about the payments they make to contractors who use an Australian business number (‘ABN’) (even if these services are only part of their business activities).
Such clients’ first TPAR will be due by 28 August 2020 for payments made from 1 July 2019 to 30 June 2020.
FBT issues on the ATO’s radar
The ATO has updated its list of ‘What attracts our attention’, with six items that specifically relate to fringe benefits tax (‘FBT’), as follows:
- Failing to report motor vehicle fringe benefits, incorrectly applying exemptions for vehicles or incorrectly claiming reductions for these benefits.
- Incorrectly calculating car parking fringe benefits due to:
- Mismatches between the amount reported as an employee contribution on an FBT return compared to the income amounts on an employer’s tax return.
- Claiming entertainment expenses as a deduction but not correctly reporting them as a fringe benefit, or incorrectly classifying entertainment expenses as sponsorship or advertising.
- Not reporting fringe benefits on business assets that are provided for the personal enjoyment of employees or associates.
- Not lodging FBT returns (or lodging them late) to delay or avoid payment of tax.
– significantly discounting market valuations;
– using non-commercial parking rates; or
– parking rates not being supported by adequate evidence.
FBT: Record-keeping exemption threshold
The exemption threshold for the FBT year commencing 1 April 2019 is $8,714 (up from the amount of $8,552 that applied in the previous year).
FBT: Benchmark interest rate
The benchmark interest rate for the FBT year commencing on 1 April 2019 is 5.37% per annum (up from the rate of 5.20% that applied for the previous FBT year).
This rate is used to calculate the taxable value of:
- a fringe benefit provided by way of a loan; and
- a car fringe benefit where an employer chooses to value the benefit using the operating cost method.
On 1 April 2019 an employer lends an employee $50,000 for five years at an interest rate of 5% p.a. with interest charged and paid six-monthly, and no principal being repaid until the end of the loan.
The actual interest payable by the employee for the current year is $2,500 (i.e., $50,000 x 5%).
However, the notional interest, with a 5.37% benchmark rate, is $2,685, so the taxable value is $185 (i.e., $2,685 – $2,500).
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.