Kristy Baxter and Angela Stavropoulos summarise the key tax matters from the 2018 Federal Budget as they relate to medicos.
As a busy practitioner it is hard to cut through the budget noise and review what it means for you.
This budget has nothing too controversial or sweeping in it, but there are a few matters of interest for medicos relating to tax matters as summarised below.
There has been a lot of talk regarding the tax cuts introduced which are relevant to all taxpayers. While the proposed cuts are generous to higher income earners, the main concessions are not set to be introduced for another 2 election cycles and reductions in individual tax rates will only occur slowly over the coming years.
The changes to tax brackets and rates will be as follows:
The annual income tax savings as compared to the 2017-18 year are as follows:
Additionally, a new Middle and Low Income Tax Offset will come into operation from 1 July 2018 until 30 June 2022. This will provide a maximum benefit of $530 for those with taxable incomes up to $125,333, and will operate in addition to the existing Low Income Tax Offset ("LITO"). Medicos embarking on their career will be able to make use of this new offset.
As previously outlined by the Government, the plans to increase the Medicare Levy have been scrapped. Hence, the levy will remain at 2% for the foreseeable future.
Extension of $20,000 instant asset deduction for small business
The Treasurer announced that the existing instant asset write-off threshold for small businesses has been extended a further twelve months to 30 June 2019.
This allows entities carrying on a business and with an aggregated turnover less than $10 million to continue to claim an immediate deduction for the acquisition of a new eligible business asset costing less than $20,000 (installed and ready for use by the 30 June 2019).
This concession has been in place for a couple of years now and is well understood by many small businesses. This can be of particular use for new medicos setting up private practice.
Excess Contributions Tax Changes
After several years of significant changes, no major changes were announced to superannuation in this year's budget (hear! hear!). However, several small changes, all of which are relaxations rather than restrictions, have been proposed.
The main change that could potentially impact medicos will allow individuals who have multiple employers and whose income exceeds $263,157 per annum to be eligible to nominate that their wages from certain employers are not subject to superannuation guarantee from 1 July 2018.
This will help ensure that the concessional superannuation contribution cap of $25,000 is not unavoidably breached, resulting in excess contributions tax and shortfall interest, merely because the individual has multiple employers. Employees who make use of this will be able to take the amounts that would have been paid to superannuation as additional wages, ensuring they are no worse off.
Do you have more budget questions?
If you would like to discuss any of the tax changes announced in the budget, please contact us for an introduction to Angela Stavropoulos or Kristy Baxter.