Federal Budget 2019-20: Tax announcements, hints and rumours

This year the Government will deliver the Federal Budget a month earlier than normal, on 2 April 2019. It is expected that the Budget will provide the principal platform for the Coalition’s election campaign.

The Federal Government is starting to clear the decks. Last week, the Government announced that it has decided not to proceed with a digital services tax at this time and will wait for a broader global consensus on a solution. The government also clarified that there will be no changes to the rules around Limited Recourse Borrowing Arrangements (LRBAs) within SMSFs with the government instead requesting that the Council For Financial Regulators and the ATO continue to monitor LRBAs in the superannuation system and report back again in three years.

Business is hopeful that the government will also provide some clarity on April 2 around start dates and/or policy in respect to:

  • Changes to the Research and Development rules
  • Reforms to Division 7A, and
  • Removal of the CGT main residence exemption for foreign residents.

There are also a number of important tax related Bills currently in the Parliament, dealing with a range of measures: instant asset write off, thin capitalisation, stapled securities, sovereign immunity, PRRT reforms and many others. With only two sitting days when both the House and Senate are both in session, the opportunity to get these Bills through Parliament prior to the election is extremely limited. In the interests of certainty, it is hoped that the Parliament can be efficient in progressing this legislation.

The Financial Services Royal Commission will continue to be a Budget focus. The Government has recently announced increased funding for ASIC over four years of $400 million, and APRA of $150 million. It is likely that banks and other financial services institutions will provide the additional funding via increased ASIC and APRA fees.

In addition, there will be $35 million to expand the jurisdiction of the Federal Court to include corporate crime and ease the load of state courts. The funding will support the appointment of two judges, 11 registry and support staff and the construction of new court facilities for the hearing of criminal proceedings.

The Government has already announced and implemented some budget or election “flavoured” announcements in the past few weeks and months such as:

  • An expansion of the instant asset write-off for a further year to 30 June 2020 and an increase to the maximum item claim from $20,000 to $25,000
  • A review of the Voluntary Tax Transparency Code (transparency guidelines to report tax affairs)
  • Funding of free Tax Clinics in select universities to provide advice and support for low income taxpayers
  • Small business assistance in the form of:
    • A small business concierge office within the Australian Small Business and Family Enterprise Ombudsman to simplify and resolve tax disputes,
    • The creation of a small business taxation division within the AAT
    • A review of the Scheme for the Compensation for Detriment Caused by Defective Administration (CDDA Scheme) to consider the operation by the ATO of the scheme in relation to small business,
    • A review into the ATO’s practices in pursuing early recovery of tax debts from small businesses who are in dispute with the ATO.
  • From 1 July 2020, donations to Men’s and Women’s Sheds of $2 or more will be tax deductible.

It has been speculated that there will be significant tax cuts for low and middle-income earners, given a quicker than expected return to surplus and a provision within MYEFO 2018-19 of approximately $9.2 billion over the forward estimates.

There is also the prospect that the Government will announce its response to the Board of Taxation recommendations into a change in individual residency tests. Other Board of Taxation reports completed or in progress could also result in budget announcements such as reviews into FBT and child care; FBT compliance costs and simplification; Tax and agriculture; Taxing rights for real property under Australia’s double tax agreements and domestic laws and small business concessions.

As always, the Treasurer will keep the majority of announcements for release on Budget night. Pre-register to receive a copy of Deloitte’s Federal Budget analysis on April 3.

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