As expected for a pre-election Budget, the Government has sought to balance benefits to the household and business sectors with significant tax relief and infrastructure spends, against the need to minimise the deficit. This has been achieved in part by better revenue numbers driven by stronger local and global economic conditions, another year of growth and the ending of tax losses generated out of the GFC.
Among the more significant reforms, the Government has undertaken:
- Staged personal income tax concessions and reforms – Low income tax offsets & increase in thresholds
- Aged Care Concessions – widening of the pension loan scheme and pension work bonus
- Significant infrastructure spending of over $24 billion
- Extensive changes to address the Black Economy and cash payments more generally
- Small business changes including extending the $20k write-off for another 12 months
- Superannuation changes including banning exit fees when changing funds, rules relating to high-income employees who breach the concessional cap and the capping of fees for small accounts
- Confining of R&D tax incentive
- MITs and AMITs – changing the tax treatment of stapled securities and removing the CGT % discount at the trust level
- Extending the multinational tax integrity rules.
All Budget 2018‑19 documents are available to download from the Treasury's Budget 2018 website.
For an in-depth analysis, please select an area of reform below:
- Corporate Tax
The Government will seek to press ahead with its broader agenda of corporate tax cuts but has introduced significant anti-avoidance measures to seek to capture lost revenue.
Over several years the Government has introduced a significant suite of integrity measures targeted at multinational taxpayers, including the multinational anti-avoidance law (MAAL) and the diverted profits tax (DPT). This year’s Budget broadens the scope of entities to which the MAAL and DPT will apply.
- Open Banking & Technology
The Budget reflects the Government’s intention to move forward with its Open Banking Regime and Consumer Data Right, providing approximately $45 million of funding over the next four years. It also announced a range of measures in relation to technology and the digital economy, including a number of interesting new scientific initiatives.
- Projects, Infrastructure & Environment
The Budget reflects the Government’s continued investment in significant regional, urban and water projects across the nation, spending over $24 billion on infrastructure funding and financing in 2018-19 to 2024-25. In addition, infrastructure specific funds for critical land transport infrastructure projects, and to alleviate congestion, increase traffic safety and improve network efficiency were announced.
- Tax Compliance
There has been a significant focus on compliance with the release of the Black Economy Package to combat tax evasion. The Government will implement the recommendations of its Black Economy Taskforce, targeting sectors where there is a higher risk of underreporting income.
- Small Business
In addition to extending the 20K instant asset write-off initiative for a further 12 months, the Budget also reflects a renewed focus on integrity changes for small businesses
- Personal Tax & Superannuation
One of the platform measures in the Budget is the announcement of a seven-year Personal Income Tax Plan, with three key steps, and a range of changes have been announced to the superannuation regime.
- Goods & Services Tax (GST) & Foreign Imports
There were no major GST reforms in the Budget, with the most significant change to extend GST to offshore sellers of hotel accommodation in an effort to level the playing field for local sellers. Craft brewers and distillers also benefited from additional support, whilst significant measures were announced to combat illicit tobacco trade.
The Budget is consistent with the Government’s planned overhaul of the taxation of stapled structures announced in March, which will tighten Australia’s thin capitalisation rules. The reforms limit access to beneficial rates of withholding tax on distributions from stapled entities.
Our full Australian Federal Budget analysis is also available for download in a PDF format (1.2MB).
If you have any questions about this year's Budget or would like to discuss how these measures will affect you, please contact us.