Unsurprisingly for a Federal Budget in an election year, the 2019-2020 Budget contains limited tax reform measures or new announcements. This reflects a trend in recent years for substantive tax reforms and measures to be announced piecemeal during the Parliamentary cycle or as a part of the Mid Year Economic and Fiscal Outlook report.
Corporate taxpayers can continue to expect ATO scrutiny of their Australian operations given the substantial funding announced by the Government.
Personal income taxes are now reformed such that there is a mega tax bracket between $45,000 and $200,000 subject to a 30% marginal tax rate.
The instant asset write off will be extended to medium sized businesses and the threshold increased from $25,000 to $30,000 per asset representing a significant investment by the Government in small businesses.
Besides the return to a Budget surplus for the first time in 12 years, clearly, the headline tax announcement are the proposed changes to the personal income tax rates and the respective income tax brackets.
Consistent with the Government’s recent economic narrative, announcements as they apply respectively to large and small business reinforce the message that large business pay its “fair share” of tax (cue the increase in funding to the ATO’s Tax Avoidance Taskforce) whilst small businesses (this concept now extended to medium businesses with turnover of less than $50m) are to receive additional concessions such as an increase in threshold for instant asset write-off from $25,000 to $30,000 on a per asset basis. Also, the recent trend for superannuation fund mergers may continue to accelerate with the announcement to make the tax relief available for super fund mergers permanent.
Along with the addition of several new jurisdictions in the Tax Information Exchange Agreement list, a welcome development for bilateral investment is the announcement that the terms of the Australia/Israel Double Tax Agreement have been agreed. This should help unlock investment opportunities particularly in the Tech and Agri-Tech sectors for both Australian and Israeli investors alike.
A final matter which should not go unnoticed is that the status of a number of important pieces of legislation before Parliament remains unclear. It would be hoped that the major parties over the course of the imminent election campaign make clear what their respective intentions are in connection with these outstanding reforms.