An Overview of the 2019 Federal Budget

On 2 April 2019, Federal Treasurer Josh Frydenberg announced that a $7.1 billion dollar surplus will be the outcome of the 2019-20 Federal Budget (“the Budget”). The Budget placed an emphasis on tax cuts, incentives for business investment and spending on health and welfare.

Key points:

  1. The legislated Personal Income Tax Plan (“the Plan”) will be changed to further lower taxes for individuals, including changes to the low and middle-income tax offset (“LMITO”), the low-income offset (“LITO”) and the personal income tax (“PIT”) rates and thresholds.

1.1 Immediate Changes

    • The LMITO will provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less.
    • Between the taxable income of $37,000 and $48,000, the value of the offset will increase at a rate of 7.5 cents per dollar to the maximum offset of $1080.
    • Taxpayers with taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1080.
    • From taxable incomes of $90,000 to $126,000 the offset will phase out at a rate of 3 cents per dollar.

1.2  Changes from July 2022 – changes to 19 per cent PIT bracket

    • The top threshold of the 19 per cent PIT bracket will
      increase to $45,000.
    • The LITO will increase to $700 (up from $645 as legislated under the Plan.
      The increased LITO will be withdrawn at a rate of 5 cents per dollar between
      taxable incomes of $37,500 and $45,000.
    • The LITO will then be withdrawn at a rate of 1.5 cents per dollar between
      taxable incomes of $45,000 and $66,667.

1.3 Changes to PIT rates and thresholds from July 2024

    • The 32.5 per cent marginal tax rate will be reduced to 30 per cent.
    • The 37 per cent bracket will also be abolished.
  1. Fast-tracking the company tax rate cut to 25 per cent for small and medium-sized companies with an annual turnover of less than $50 million and increases to the unincorporated small business tax discount rate.
  2. A number of superannuation measures were announced, including:
          • Tax relief for merging superannuation funds;
          • The removal of the superannuation contribution work test;
          • Changes to non-concessional contributions;
          • Increase of the spouse contribution age limit to 74 years;
          • ATO funding for integrity measures to recover unpaid tax and superannuation liabilities.
  1. The Australian Taxation Office’s Tax Avoidance Taskforce (Taskforce), which was established in 2016 to try to overcome tax avoidance particularly by multi-national companies, is to receive additional funding;
  2. 80,000 new apprenticeships are planned to be offered over five years, with a focus on baking, bricklaying, carpentry and plumbing apprenticeships. Incentive payments of $8,000 per placement will be offered to employers;
  3. Strategies relating to the Single Touch Payroll (STP) system, to streamline employers reporting of employee payroll and superannuation were announced;
  4. A significant infrastructure investment has been announced. For Victoria, there are now plans for a fast train between Melbourne and Geelong and upgrades to suburban roads. In addition, $68 million has been earmarked for Victorian commuter car parks;
  5. For New South Wales, funds have been allocated for improvements to the M1 Pacific Motorway, the Princess Highway and the Western Sydney Rail road;
  6. Whilst $2.6 billion has been pledged to infrastructure spending in Queensland, with priority being given to regional and urban transport infrastructure;
  7. In education, funding has been allocated for pre-school education and to increase the numbers of females in science, technology, maths and engineering as well as scholarships for those studying in regional Australia;
  8. In the health sphere, the National Disability Insurance Scheme did not receive any additional funding, however, new medicines have been added to the Pharmaceutical Benefits Scheme (PBS). Notably, cancer treatment drug Besponsa will be listed under the PBS reducing cost per course from $120,000 to about $40 for general patients. Further, a $1.1 billion boost to Medicare over five years for primary care and frontline health services as well as an increase in funding for a mental health and suicide prevention strategies;
  9. A further reduction in the number of foreign doctors brought to Australia, which should generate $300 million in savings over four years;
  10. No new funding has been announced for any renewable energy or climate change funding. Although, the Budget does include funding an electric car strategy; and
  11. The areas of National parks, arts, cultural heritage, foreign aid, as well as sport and recreation have all received cuts.

It is expected, now that the Coalition Budget has been announced, that the date for Federal election will soon be declared.

Your can read more about the tax aspects of the 2019-2020 Federal budget here.

The Authors

Michael Kohn

PARTNER, MELBOURNE