Will 2018 Tax Changes Help Aussies in the Long Haul?

On the 8 May 2018, the Australian federal government released its 2018-19 budget, in which several proposed changes to taxation and superannuation laws were addressed.

Are you impacted? Take a look at a few of the more major changes to find out if they apply to you.

Travel tax deductions no longer can be claimed for residential rental properties. Homeowners will now receive fewer tax refunds, reducing their free cash flow from rental properties.

Similarly, depreciation deductions – tax deductions for second-hand assets for rental properties’ usage –  purchased after 9 May have also been removed with the 2018 tax changes. You can still claim these tax deductions on commercial properties and rented commercial properties.

Low- and middle-income earners can expect personal income tax relief, with plans to provide income tax relief for high-income earners at a later time.

The long-term goal for an Australian tax system overhaul is to introduce a flat tax rate after the next election. Individuals earning up to $37,000, $47,999 and $90,000 annually will benefit from an extra $200-530.

In fact, dual-income families can look forward to saving as much as $1,000 on their annual tax bill each year.

Australians can start looking forward to the 0.5-percent increment from the current 2-per cent Medicare levy as of 1 July 2019 onwards. Families and pensioners can reap the most benefits from this scheme, with a $47,670 threshold and an additional $3,356 for each dependent student or child.

There has been no change announcements for private health insurance rebates or additional charges for Medicare levy at this time.

Australian small business owners are now entitled to tax offsets for their total tax payable amounts based on their business income.

If your small business earnings are less than $5 million in turnover and are distributed only to you as the sole trader or as part of a partnership or trust, then you are entitled to an increased income tax offset of 8 percent, up to $1,000 annually, as opposed to the 5 percent offered in recent years.

If you’re an Australian resident and taxpayer, you are eligible for a 60-percent discount on the Capital Gains Tax (CGT) when you invest in any affordable housing.

Foreign tax-paying residents meanwhile will face an increment of CGT withholding tax rate of 2.5 percent from the original 10 percent, and the withholding threshold for sales have also been decreased from $2 million to only $750,000.

Tax changes in other sectors also apply. Per the Medicare levy increment, Fringe Benefits Tax (FBT) is set to be increased, possibly at a rate of 47.5 percent, although the start date of this change has yet to be announced.

The new tax system also removes double taxation for purchasing and usage of digital currencies such as bitcoins.

Where high-tech prototypes, such as those for vehicles and automotive parts or components, are concerned, duty relief will be provided, as long as the criteria for eligibility are met.

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