The Federal Budget announced a series of measures, some of which were legislated before the election was called.
Extension and increase to the instant asset write-off
The popular instant asset write-off for small business has been extended and increased. The new laws:
- increase the threshold below which small business entities can access an immediate deduction for depreciating assets and certain related expenditure (instant asset write-off) from $25,000 to $30,000; and
- enables businesses with aggregated turnover of $10 million or more but less than $50 million to access instant asset write-off for depreciating assets and certain related expenditure costing less than $30,000.
Assets will need to be used or installed ready for use from Budget night until by 30 June 2020 to qualify for the higher threshold. Anything previously purchased does not qualify for the higher rate but may qualify for the $20,000 or $25,000 threshold. Similarly, anything purchased but not installed ready for use by 30 June 2020 will not qualify.
The instant asset write-off only applies to certain depreciable assets. There are some assets, like horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc., that don’t qualify.
For assets costing $30,000 or more
For small businesses (aggregated turnover under $10m), assets costing $30,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter. If the closing balance of the pool, adjusted for current year depreciation deductions (i.e., these are added back), is less than $30,000 at the end of the income year, then the remaining pool balance can be written off as well.
The ‘lock out’ laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out) will continue to be suspended until 30 June 2020.
Pooling is not available for medium sized businesses which means that the normal depreciation rules based on the effective life of the asset will apply to assets that don’t qualify for an immediate deduction.
The amendments apply from 7.30 pm legal time in the Australian Capital Territory on 2 April 2019 until 30 June 2020
One-off energy assistance payments
A one-off energy assistance payment of $75 for singles and $62.50 for each eligible member of a couple, will be made to predominantly pension and social welfare recipients who were residing in Australia on 2 April 2019. The payments are expected to be completed by 30 June 2019.
Medicare levy and surcharge income threshold increase
The Medicare levy low income thresholds for singles, families, and seniors and pensioners will increase from the 2018-19 income year, meaning more people will be excluded from paying the levy.
North QLD flood recovery
Grants are treated as non-assessable non-exempt income if they:
- are Category C or D measure disaster recovery grants paid to small businesses, primary producers or non-profit organisations; and
- relate to flooding that commenced in Australia in the period between 25 January 2019 and 28 February 2019 (inclusive).
As a result, Category C and D measure grants to small businesses, primary producers and non-profit organisations affected by floods in North Queensland in late January 2019 and that continued into February 2019 are non-assessable non-exempt income.
And, grants to primary producers are non-assessable non-exempt income if the grants are for repairing or replacing farm infrastructure, restocking or replanting, and they are provided for the purposes of an agreement between the Commonwealth and a State or Territory to assist primary producers affected by the flooding.
As a result, such grants to primary producers in North Queensland affected by floods in late January 2019 that continued into February 2019 are non-assessable non-exempt income.
ATO doubles rental deduction audits
In the 2017-18 financial year, more than 2.2 million Australians claimed over $47 billon in deductions and the Australian Taxation Office (ATO) thinks that is too much - one in ten is estimated to contain errors.
4,500 audits of rental property deductions will be undertaken this year with the focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing. Deliberate cases of over-claiming are treated harshly with penalties of up to 75% of the claim. In one case exposed by the ATO, a taxpayer had to pay back $12,000 in claims for deductions against a holiday home that was not genuinely available for rent and was blocked out during the holiday season. In another, a taxpayer paid back $5,500 because they had not apportioned their rental interest deduction to account for redraws on their investment loan to pay for living expenses.