The treasurer Josh Frydenberg delivered the 2019 Australian federal budget on 2 April and outlined several key implications for businesses and founders.
What does the 2019 Budget mean for me?
Here are the key points of note:
Startups / SMEs
- No changes to the small business entity tax rates. The legislation provides for companies with turnovers less than $50 million still being taxed at 27.5% as before, and will be further reduced to 25% by 2021-22.
- The instant asset write-off continues and is up to $30,000 (up from $25,000) and will be available until 30 June 2020. This has been extended twice consecutively and additionally, the SBE simplified depreciation pool will continue at the previous rates.
- Employee share schemes will be simplified – it is unclear at this stage how the government practically intends to streamline this as they are currently undergoing public consultation on the matter, with any changes likely to be implemented after the May election.
- GST reporting will be simplified by reducing the number of questions posed on Business Activity Statements. There is no further guidance on what is being culled specifically.
Changes for Individuals
- Increase in the low and middle income tax offset (LMITO). The increase will be to $1,080 for singles or $2,160 for dual income families and will be available from the 2019 tax year to 2022 at this stage. This will be tiered through a reduction in tax of up to $255 for individuals with incomes of $37,000 or less and between $37,000-$48,000 the offset will increase at a rate of 7.5c per dollar.
- Increase in the low income tax offset (LITO) from 1 July 2022. This will be increased to $700 (up from $645) and will be progressively withdrawn for incomes between $37,500-$45,000 at 5 cents per dollar to incomes between $45,000-$66,667 at 1.5 cents per dollar. It is worth noting that the Labor party, if elected, intends to implement both the LMITO and LITO at this stage.
- Changes to the progressive tax brackets and rates. Firstly, from 1 July 2022, the 19% tax bracket will be pushed to include incomes up to $45,000 (up from $41,000) and from 1 July 2024 the 32.5% tax rate will drop to 30%. From 2024-25 onwards, the entire 37% tax bracket will be removed pushing this bracket down to the aforementioned 30% rate. In essence this means the individual income tax brackets will be at 3 rates – 19%, 30% and 45%. The Labor party at this stage has not provided its support for these measures.
Increased reporting for ABN holders.
From 1 July 2021, all entities with an ABN will need to include this in their tax return. Additionally, from 1 July 2022 ABN holders will be required to confirm the accuracy of their details annually.
As noted throughout, the proposed changes are contingent on the government passing the budget through both houses of parliament which at this stage appears unclear.
Overall it is an attractive budget for startups. The proposed amendments to employee share schemes and small business tax rates could be the impetus to drive growth in the 2019 year and beyond.