2019 Federal Election Results: What will it mean at tax time?
Scott Morrison’s surprising win saw the Coalition remain in government, but some changes are still on the way. With the parties agreeing on very few policies, we may be in for a bumpy ride for the first few months. What will the next three years of Liberal government mean for you? Here’s what you need to know.
First of all, we need to remember that the Coalition will likely be in minority in at least one house of Parliament, meaning they need the support of Independent Senate seats to make any changes.
Individual Tax Payers
The Prime Minister has promised to double the tax offset announced in last year’s budget, and if this change is passed in the Senate, all taxpayers earning up to $126,000 per year will get $1080 back at tax time. However, all promised tax cuts are very likely to be delayed until June 2020. Although Morrison was hoping to push the new legislation through quickly, there is a formal and exhaustive bureaucratic process that must be followed.
The current tax brackets are set to be slowly restructured to get rid of the current 37% tax bracket. From 2022 the top threshold of the 32.5% tax bracket will be increased from $90,000 to $120,000. This equates to a tax cut of up to $1,350 per year for taxpayers in this income bracket and above.
By 2024, the 32.5% will be flattened to just 30%, and the top threshold for this tax bracket will be increased from $120,000 to $200,000. As for the 19% tax bracket, the income threshold will be increased from $37,000 to $41,000.
Small Business Tax
In the wake of last month’s Federal Election, small business owners can enjoy a massive confidence boost. The Coalition plans to lower the company tax rate for small and medium sized companies to 25% by 2021-22, which will apply to businesses earning less than $50m. Similar tax discounts will apply to sole traders, partnerships and trusts. Morrison has also promised to help business cash flow and provide better access to finance, in addition to his pledged to create 250,000 new small and family businesses over the next five years.
Tip: Don’t forget that the instant asset write-off for small businesses has already been increased to $30k.
Property Investor Tax
There will be no changes to the current legislation concerning negative gearing or the Capital Gains Tax, so your retirement plans are safe for now! A such, the housing market is looking at an uptick as consumers draw confidence from the status quo being maintained. As to be expected, the Housing Industry Association (HIA) has reported a significant increase in new home sales. For now, we are safe from the ripple effect predicted by Labor’s proposed changes to property tax laws.
For at least the next 3 years, we don’t need to worry about Labor’s proposed increase of the super guarantee rate, and wage earners will still be able to claim their super contributions as a tax deduction. The catch-up contribution rules will still be in place for low income earners to make extra super contributions, and there won’t be any reduction in the threshold for extra tax super contributions. Super contribution caps will remain as they are, and the franking credit refunds for individuals and SMSF’s are safe for now too.
Are you ready for June 30?
The Coalition win is a win for property investors, small businesses and individual tax payers. ABA Tax are just a friendly phone call away, and together we’ll make sure you don’t miss out on any of your tax entitlements in 2019. Get in touch today for a straight forward and stress-free road to you maximum legal refund.