PWC'S FEDERAL BUDGET INSIGHTS - PWC AUSTRALIA
Page content transcription
If your browser does not render page correctly, please read the page content below
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | i Contents 1. Our summary: Good news day 01 2. Personal Tax 03 3. Corporate Tax and Private Business 05 4. Superannuation 07 5. Global Taxes 09 6. Indirect Taxes and Trade Measures 11 7. Employment Taxes 13 8. Other Measures 14 9. Forward Tax Agenda 16
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 01 1 Our summary Good news day Good news can be remarkably Table 1.1: Income tax offsets for Australian tax residents hard to sell. Every day, there are stories of achievement 2017-18 (act.) 2018-19 (est.) 2019-20 (est.) and progress which pass with Budget surplus (deficit) little recognition. The prevailing Underlying cash (10.10) (4.20) 7.10 balance trend is to report mostly on as % GDP (0.50) (0.20) 0.40 the negative, as a scan of any Real GDP growth 2.80 2.25 2.75 media headlines will confirm. Unemployment 5.40 5.00 5.00 There is plenty of good news, it CPI 2.10 1.50 2.25 just rarely makes the front page. Wages growth 2.10 2.50 2.75 Treasurer Josh Frydenberg will be hoping for a different outcome with his first, decidedly good Beyond the big budget Indeed, without the welcome news, Federal Budget. announcements, it is sometimes boost of a resources sector This Budget was always going the small changes that go under travelling well in both export to be shaped by the political the radar. volumes (especially for iron reality of a Federal election only ore) and price (especially for Last year, the Federal Budget metallurgical coal), Australia’s weeks away. An economy which heralded real GDP growth remains in remarkably good economic growth would have would accelerate “to 3 per been around a further ¼ per cent shape - notwithstanding some cent growth in 2018–19 and challenges, more on those later - down. Not all (Budget) heroes 2019–20”, bolstered by both wear capes. has allowed the Treasurer to claim favourable domestic and the first Budget surplus in more international conditions. The wages picture is similar. than a decade, with room still for Despite an improvement in big spending in all the expected Treasury’s expectations now are unemployment sitting happily areas and a centrepiece budget that the economy will “grow at at five per cent, wages growth strategy of significant personal around its estimated potential remains sluggish, and the income tax cuts. rate of 2¾ per cent in 2019-20 expected rebound in wages and 2020-21.” Did you spot the growth is pushed out another There is good budget news for subtle shift? In an enterprise as middle-income earners, small year in Treasury’s projections. big as the Australian economy, Although designed to solve a businesses, regional Australia, that missing ¼ per cent growth pensioners, apprentices, completely different political will be noticed. equation, the tax cuts announced infrastructure, the environment, and even an extra $1 billion for by the Treasurer will boost the Australian Taxation Office. household disposable incomes, and will go at least some way towards filling the gap that moribund wages growth otherwise will leave in the real economy.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 02 And what of those challenges? Last year, the Budget papers boasted Australia was “well placed to benefit from the global upswing” and “GDP growth in major advanced economies has become increasingly synchronised”. What a difference a year makes. In a classic Treasury understatement, the Budget papers now dryly observe the “... risks associated with Brexit have become more pronounced in recent months …”, flagging also elevated tensions in the wider global trade landscape. Treasury also points to the softening in domestic property markets, and downside risks to both dwelling investment and household consumption – two of the mainstays of Australia’s economy. That $7 billion surplus next year is close, but we aren’t there yet.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 03 Personal Tax 2 As expected, the Government Changes to personal income taxes has announced further tax relief for low and middle income Low and Middle Income Tax Offset and Low Income Tax Offset earners building on last year’s The new LMITO, which applies From 1 July 2022, the LITO and Personal Income Tax Plan which from 1 July 2018 until 30 June the LMITO will merge into a is already legislated. 2022, currently provides a tax new LITO. The Government has This relief is provided by way of: offset of up to $530 per year in announced in this year’s Budget addition to the LITO (which is a that the maximum amount of • from 1 July 2018 until 30 June maximum of $445). this LITO will be increased from 2022, a significant increase in $645 (as currently legislated) to the Low and Middle Income The Government has announced $700 per year, to be phased in as Tax Offset (LMITO) its intention to increase the set out in Table 2.2. • from 1 July 2022, an increase maximum amount of the LMITO in both the top threshold of the to $1,080 per year, to be phased 19 per cent personal income in as set out in Table 2.1. The tax bracket and an increase first time that the benefit of this to the Low Income Tax Offset reduction in income tax will be (LITO), and received by affected taxpayers will be when they are assessed • from 1 July 2024, a reduction in on their 2018-19 income the 32.5 per cent marginal tax tax return. rate to 30 per cent. Table 2.1: Increase in Low and Middle Income Tax Offset for Australian tax residents Taxable Income ($) Revised amount of the LMITO ($) 37,000 or less 255 37,001 to 48,000 255 plus 7.5 per cent of excess over 37,000 48,001 to 90,000 1,080 90,001 to 126,000 1,080 less 3.0 per cent of excess over 90,000 Table 2.2: New Low Income Tax Offset for Australian tax residents Taxable Income ($) Revised amount of the new LITO ($) 37,000 or less 700 37,001 to 45,000 700 less 5.0 per cent of excess over 37,500 45,001 to 66,667 325 less 1.5 per cent of excess over 45,000
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 04 Change to the personal One-off Energy Medicare levy income tax brackets Assistance Payment The Medicare levy low-income Under the already legislated The Government will also make thresholds for singles, families Personal Income Tax Plan, a one-off Energy Assistance and seniors and pensioners will gradual changes to the tax Payment of $75 for singles and increase from the 2018-19 income thresholds will occur to eventually $62.50 for each member of tax year as follows: remove the 37 per cent tax a couple ($125 total) who are • Individuals $22,398 (increased bracket and apply a 32.5 per eligible for ‘qualifying payments’ from $21,980) cent tax rate to taxable income as at 2 April 2019 and who between $41,000 and $200,000 are residents of Australia for • Families $37,794 (increased by 1 July 2024. tax purposes. from $37,089), with an additional $3,471 for each Additional tax threshold and Qualifying payments include the dependent child or student marginal rate changes have now Age Pension, Carer Payment, (increased from $3,406) been announced, increasing Disability Support Pension, the current top threshold of the Parenting Payment Single, the • Single seniors and pensioners 19 per cent tax bracket from Veterans’ Service Pension and $35,418 (increased from $41,000 to $45,000 from 1 July the Veterans’ Income Support $34,758), and 2022 and reducing the 32.5 per Supplement, Veterans’ disability • The family threshold for cent marginal tax rate to 30 per payments, War Widow(er)s seniors and pensioners will cent from 1 July 2024. Pension, and certain permanent be increased to $49,304 impairment payments. (increased from $48,385) plus Table 2.3 summarises all of the $3,471 for each dependent relevant changes announced. The payment will be exempt child or student (increased from income tax with first from $3,406). payments expected to be made automatically before 30 June 2019, subject to the passage of legislation. Table 2.3: Income tax rates for Australian tax residents (Income range ($)) Rate (%) Current Thresholds Thresholds Thresholds (from 1 July 2018) from 1 July 2022 from 1 July 2024 Tax free 0 - 18,200 0 - 18,200 0 - 18,200 19 18,201 - 37,000 18,201 - 45,000 18,201 - 45,000 30 45,001 -200,000 32.5 37,001 - 90,000 45,001 - 120,000 37 90,001 - 180,000 120,001 - 180,000 45 > 180,000 > 180,000 > 200,000
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 05 Corporate Tax and 3 Private Business The Government has provided a boost to small and medium sized businesses, increasing the instant asset write-off threshold and extending the measures to include medium sized businesses. The deferral of the proposals to amend the deemed dividend rules (Division 7A) until 1 July 2020 is also welcome news as it allows private business groups more time to plan their cash flow in readiness for the new measures. Boost to the instant asset write-off In order to enhance business activity and investment the Government has announced the threshold for the instant asset write-off will be increased to $30,000. Access to the write‑off will also be expanded to include both small and medium businesses which have an aggregated annual turnover of up to $50 million. As with the existing instant As a result, determining access Medium businesses (aggregated asset write-off the threshold is to the concession for the 2019 annual turnover of $10 million applied on a per asset basis, income year may be complicated or more to less than $50 million) allowing businesses to benefit for small businesses as there are will benefit from the increased from the write-off of multiple three different threshold amounts $30,000 instant asset write-off depreciable assets. which may apply. The applicable for depreciable assets purchased threshold amounts will depend and first used, or installed ready The Government had previously upon when the assets are first for use, from 7:30pm (AEDT) on announced on 29 January 2019 used or installed ready for use as 2 April 2019 to 30 June 2020. an increase in the instant asset set out in Table 3.1. write-off threshold from the historical $20,000 to $25,000 for small businesses (those with an aggregated annual turnover of less than $10 million).
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 06 Table 3.1: Instant asset write-off thresholds Assets first used or Assets first used or Assets first used or installed ready for installed ready for use installed ready for use on or before between 29 January use from 7:30pm 28 January 2019 2019 and prior to 7:30pm (AEDT) 2 April 2019 to (AEDT) 2 April 2019 30 June 2020 Small business (aggregated $20,000 $25,000 $30,000 annual turnover of less than $10 million) Medium business (aggregated – – $30,000* annual turnover of $10 million to less than $50 million) *Note: a medium business asset must also be purchased after 7:30pm (AEDT) 2 April 2019 to qualify for the concession Deferral of private The Division 7A reforms were company deemed originally due to apply from 1 July 2019 (as announced in last dividend reforms year’s Federal Budget). The delay The Government has announced to the start date by 12 months that it will defer its proposals to is welcome news as this will amend the Division 7A deemed allow further and important dividend rules, which apply to consultation on the details of the treat certain loans from private measures and also to refine the companies to its shareholders approach to their implementation. and associates as taxable In particular, this should dividends, to now apply to enable appropriate transitional income years commencing on arrangements to be developed or after 1 July 2020. Importantly, in relation to UPEs and loans this will also result in the deferral which are currently outside the of the proposed changes to the operation of these rules so that treatment of unpaid present affected taxpayers have sufficient entitlements (UPEs). time to plan and manage their cash flow position.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 07 Superannuation 4 While no major changes to the Permanent tax existing superannuation system relief for merging were announced in this year’s Federal Budget, the Government superannuation funds has put forward a number of In a welcome move, the proposals to ensure that the current tax relief for merging superannuation system operates superannuation funds will as intended and to ensure be made permanent from greater fairness and flexibility for 1 July 2020, ensuring that participants nearing retirement. superannuation fund member balances are not affected by tax when superannuation funds merge. This should remove tax as an impediment to mergers and facilitate industry consolidation. Self-managed superannuation funds are excluded from this tax relief.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 08 Removal of work test Insurance within Funding to enable requirement superannuation electronic refund From 1 July 2020, individuals The Government has announced requests under a number aged 65 and 66 will be able to a delayed start date of 1 of superannuation make voluntary concessional and October 2019 for the previously arrangements non-concessional superannuation announced measures which seek contributions, without meeting to ensure that insurance within An additional $19.3 million will the “work test”. The work superannuation is only offered also be provided to the Australian test requires an individual to on an opt-in basis for individual Taxation Office (ATO) over three work at least 40 hours over accounts with balances of less years from 2020-21 to enable a 30 consecutive day period than $6,000 and new accounts electronic requests to be sent for gain or reward before they belonging to a member who is to superannuation funds for the are able to make voluntary under the age of 25 years. release of money required under contributions to superannuation. a number of superannuation This approach is welcome as it Streamlining requirements arrangements. This change is intended to apply from 31 March will enable participants nearing for calculation of exempt 2021. The start date of self- retirement to improve their current pension income retirement savings regardless managed superannuation funds of their working arrangements. The Budget includes a number rollovers in Superstream will be of measures targeted at reducing delayed until 31 March 2021 to Extension of bring-forward costs and simplifying reporting coincide with this change. arrangements for superannuation funds by streamlining the administrative The bring-forward arrangements requirements for the calculation which currently apply to of exempt current pension individuals aged less than income (ECPI) from 1 July 2020. 65 years will be extended to those aged 65 and 66 from 1 July In welcome news the Government 2020. Under the bring-forward has confirmed that it will remove rules, individuals meeting the a requirement for superannuation age requirement can make three funds to obtain an actuarial years’ worth of non-concessional certificate when calculating ECPI superannuation contributions using the proportionate method, (i.e. after-tax contributions), where all members of the fund thereby contributing up to are fully in the retirement phase $300,000 in a single year, with for all of the income year. no further non-concessional Changes will also be made contributions for the following to allow superannuation fund two years. trustees to choose their preferred method of calculating ECPI where Spouse contributions there are interests in both the From 1 July 2020, the age limit accumulation and retirement for spouse contributions will phases during an income year. increase from 69 to 74 years. Currently those individuals aged 70 years and over cannot receive contributions made by another person on their behalf.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 09 Global Tax 5 Building on already strong • specify that, for income years anti‑avoidance and integrity rules commencing on or after April within the existing tax framework, 2019, the so-called integrity Australia continues to pursue rule, which affects certain measures aimed at addressing payments of interest (or of a perceived tax avoidance by similar character) directly or multinational corporations. indirectly to foreign interposed zero or low rate (FIZLR) Refinement to Australia’s entities, can apply where other hybrid mismatch rules provisions have applied. This is a change from the current In this year’s Budget, the law which states that the Government announced integrity rule does not apply proposed amendments to the if a payment gives rise to any recently introduced Australian of the other six types of hybrid hybrid mismatch rules. These mismatches. As a reminder, amendments will broadly have the integrity rule is a unilateral the same application date as the measure and is a key departure original hybrid mismatch rules from the Organisation for (i.e. income years commencing Economic Co‑operation on or after 1 January 2019). and Development (OECD) The proposed amendments are recommendations expected to: in relation to hybrid mismatch arrangements. • include rules which clarify the application of the hybrid Although some of these changes mismatch rules to Australian had been anticipated, taxpayers multiple entry consolidated face significant uncertainty (MEC) groups and trusts. The because details of the proposals manner in which the rules have not yet been released apply to trusts has been a by the Government. This all particular area of uncertainty adds to existing uncertainty but the announcement does associated with delays in long not clarify how these issues awaited guidance from the might be resolved Australian Taxation Office (ATO) • limit the definition of foreign regarding the integrity rule and tax, which could impact, important questions regarding the for example, the concept of interaction of Australia’s hybrid “subject to foreign income mismatch rules with foreign tax” and “foreign income (particularly US) tax rules. tax deduction”, and
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 10 Measures in relation –– rules to reduce potential Updating the list to tax treaties double taxation, and of information Two separate measures –– limitation of benefits article exchange countries which deny treaty benefits impacting tax treaties The Government has announced in certain circumstances were announced: in this year’s Budget that it will where there is a principal • Refinements to the purpose to take advantage include Curacao, Lebanon, International Tax Agreements of the treaty. Nauru, Pakistan, Panama, Peru, Act 1953 to provide that certain Qatar and United Arab Emirates income covered by a tax If the DTA enters into force into the list of countries whose treaty is deemed to have an during the 2019 calendar year, residents are eligible to access Australian source. No start the withholding tax rules will a reduced withholding tax date was announced for the apply from 1 January 2020. rate of 15 per cent on certain proposed amendments. While in respect of other distributions from managed Australian tax in relation to investment trusts (MITs) and • A double tax agreement (DTA) income, profits or gain, the Attribution MITs (or ten per cent between Australia and the new DTA will apply to any year for certain distributions from State of Israel, which was of income beginning on or clean buildings MITs), instead of signed on 28 March 2019, will after 1 July next following the the default rate of 30 per cent. be given the force of law in date on which the DTA enters The updated list of countries will Australia. The key features of into force. be effective from 1 January 2020. this new DTA include: These countries are in addition to –– reduced withholding tax the 54 jurisdictions which were rates for dividends (zero to added to the list of information 15 per cent), interest (zero exchange countries with effect to ten per cent) and royalties from 1 January 2019. (five per cent)
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 11 Indirect Taxes and 6 Trade Measures Supporting Australian Increased luxury car exports tax refunds for eligible The Government announced it primary producers and will provide $61 million over three tourism operators years from 2019-20 to support The Government will further Australian exporters, comprising: extend luxury car tax refund • $60 million over three arrangements for primary years from 2019-20 to the producers and tourism operators. Export Market Development For vehicles acquired on or after Grants (EMDG) scheme. 1 July 2019, eligible primary This additional funding will producers and tourism operators support the EMDG scheme in will be able to apply for a luxury assisting Australian small and car tax refund to a maximum of medium enterprise exporters $10,000 (up from $3,000 under to increase exports to new the current arrangements). This markets, gain exposure in measure will not impact on the international markets, develop eligibility criteria and types of brand recognition and form vehicles eligible for the current relationships with potential partial refund. overseas customers, and • $1 million in 2019-20 to further promote Australian export industries.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 12 Progress on Free Enhancing Australia’s Trade Agreements agricultural trade Progress on the following The Government announced Free Trade Agreements was a package of measures to acknowledged in the Budget: enhance agricultural exports • The Indonesia-Australia and trade through increasing Comprehensive Economic export markets access and Partnership Agreement emerging export opportunities. (IA‑CEPA) was signed by the The measures will provide Australian and Indonesian $29.4 million over four years from governments on 4 March 2019. 2019-20 (and $2.6 million per year Over time, the IA-CEPA will ongoing), including: provide significantly improved • $5.1 million over four years preferential duty arrangements from 2019-20 (and $0.2 million or remove tariffs for 99 per per year ongoing) for actions to cent of Australian goods reduce the impact of non-tariff exports to Indonesia. policies on agricultural and • On 26 March 2019, the food exports Australian and Hong Kong • $11.4 million over four years governments signed the from 2019-20 (and $2.4 million Australia-Hong Kong Free per year ongoing) to improve Trade Agreement (A-HKFTA). technical market access for Upon ratification, A-HKFTA will horticulture exports ensure that goods exported • $6.8 million over four years from Australia continue to from 2019-20 to extend the be entered into Hong Kong Agricultural Trade and Market duty free, whilst tariffs will be Access Cooperation program. eliminated on imports into This will assist Australian Australia from Hong Kong. businesses to reduce technical barriers to trade for agricultural Revised start date for the exports and secure access to biosecurity imports levy premium markets The Budget acknowledges the • $6.1 million over four years Government’s announcement from 2019-20 to extend the of a change in the start date Package Assisting Small of the biosecurity imports levy Exporters program. This (previously announced in the measure will support small 2018-19 Budget) from 1 July exporters to overcome barriers 2019 to 1 September 2019. in export sector participation. The later start date will allow recommendations on the design Other indirect and implementation of the levy to tax measures be made by an industry steering committee to the Minister for The Government has granted Agriculture and Water Resources. or extended access to refunds of indirect tax (including goods and services tax, fuel and alcohol taxes) for certain diplomatic and consular representations under the Indirect Tax Concession Scheme.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 13 Employment Taxes 7 Single Touch • Simplification and automation Payroll changes in reporting of employment income for social security The Government has announced purposes through STP. From measures relating to the Single 1 July 2020, income support Touch Payroll (STP) system which recipients who are employed streamlines the way employers will report income received report employee payroll and during the fortnight, with income superannuation information. STP data being shared with the ‘real time’ reporting applied to the Department of Human Services majority of employers with 20 or through expanded data-sharing more employees from 1 July 2018 arrangements. This measure and will apply to employers with will reduce the likelihood of fewer than 20 employees from income support recipients 1 July 2019. receiving an overpayment of income support payments (and Specifically, the following subsequently being required measures are proposed: to repay the amounts). This • Funding of $82.4 million over measure does not impact on the four years from 2019-20 eligibility criteria or maximum (including capital funding of payment rates. $16 million over four years from 2019-20) to the Australian Sham contracting Taxation Office (ATO) and the The Government announced Department of Veterans’ Affairs it will provide $9.2 million over to support the expansion of four years from 2019-20 (and data collected through STP $2.3 million ongoing) to establish by the ATO and the use of a dedicated sham contracting this data by Commonwealth unit within the Fair Work agencies. STP data will be Ombudsman. This dedicated expanded to include more unit aims to address sham information about gross pay contracting behaviour by some amounts and other details. employers to avoid employment entitlements through increasing education, compliance and enforcement activities, and dedicating additional resources to investigate and litigate cases.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 14 Other Measures 8 More funding to ATO’s Tax Funding to implement Avoidance Taskforce Banking Royal The Australian Taxation (ATO) will Commission measures be provided with $1 billion over The Government has allocated four years to extend the operation $606.7 million of funding to of the Tax Avoidance Taskforce facilitate its response to the Royal until 30 June 2023. The Taskforce Commission into Misconduct will have a renewed focus on in the Banking, Superannuation multinationals, big business and Financial Services Industry and high wealth individuals, over the next five years. Both and expand its programs and the Australian Securities and market coverage to include Investments Commission (ASIC) increased scrutiny of specialist and the Australian Prudential tax advisors and intermediaries Regulation Authority (APRA) that promote tax avoidance will have additional funding to schemes and strategies. This is help restore trust in Australia’s estimated to collect an additional financial sector. $3.6 billion in revenue over the forward estimates. ASIC will be provided with an additional $404.8 million A further $24.2 million of funding to implement its new has also been provided in enforcement strategy and 2018‑19 to the Department of expand its capabilities and Treasury to conduct a campaign roles in accordance with the focused on improving the integrity recommendations of the Royal of the Australian tax system. Commission. APRA will have an additional $145 million in funding to strengthen its supervisory and enforcement activities which will support its response to key areas of concern raised by the Royal Commission.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 15 Black economy – Income tax exemptions for strengthening the flood and storm grants ABN system An income tax exemption will The Government has announced be provided for qualifying grants that it will disrupt black economy made to primary producers, behaviour and target the misuse small businesses and non‑profit of the Australian Business organisations affected by Number (ABN) system. From North Queensland floods. The 1 July 2021, ABN holders with an exemption will apply where the income tax return obligation will grants relate to the monsoonal be required to lodge their income trough, which produced tax return. From 1 July 2022, flooding that started on or after ABN holders will be required to 25 January 2019 and continued confirm the accuracy of their into February 2019. details on the Australian Business Similarly, payments to primary Register annually. Currently, producers in the Fassifern Valley ABN holders are able to retain in Queensland affected by their ABN regardless of whether storm damage in October 2018 they comply with their income will be treated as income tax tax return lodgment obligation exempt. This relates to payments or the obligation to update their distributed to affected taxpayers ABN details. The Government’s through a grant totalling $1 million announcement builds on its to the Foundation for Rural and comprehensive actions to reduce Regional Renewal. the impact of the black economy. Further ATO funding Updates to deductible to strengthen integrity gift recipients measures From 1 July 2020, Men’s Sheds and Women’s Sheds will be The Government has announced able to access Deductible Gift that it will provide $42.1 million Recipient (DGR) status via over four years to the ATO to the establishment of a DGR increase activities to recover general category. unpaid tax and superannuation liabilities. This initiative will focus For the period 1 July 2019 to on larger businesses and high 30 June 2024, the following wealth individuals to ensure organisations have been on-time payment of their tax approved as specifically- and superannuation liabilities. listed DGRs: These activities will not extend • Australian Academy of Law to small businesses. • China Matters Limited • Foundation Broken Hill Limited • Motherless Daughters Australia Limited • Superannuation Consumers Centre Limited, and • The Headstone Project (Tasmania) Incorporated.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 16 Forward Tax Agenda 9 In the past 12 months, the It is pleasing to see the Government has made solid Government recently released progress in implementing its its response to the Treasury tax legislative agenda with consultation paper on the digital a number of important reforms economy released last year. enacted including: Treasurer Josh Frydenberg • the Organisation of Economic announced in March 2019 that Co-operation and Development given feedback received from (OECD) Multilateral Instrument, the consultation and recent which entered into force for international developments, Australia as early as 1 January “the Government has decided 2019 for some treaty countries, to continue to focus our efforts on engaging in a multilateral • anti-hybrid provisions that process and not to proceed apply to income years with an interim measure, such commencing on or after as a digital services tax, at this 1 January 2019, and time.” This will provide much • a range of measures targeting needed certainty to taxpayers the black economy. focussed on digitalisation in the global economy. There are, however, a number of critical previously announced measures that have not yet been enacted. Some of these are highlighted in Table 9.1 over the following pages.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 17 Table 9.1: Key measure previously announced still to be legislated Measure Status Global tax Thin capitalisation changes Currently before Parliament. The measure relating to revaluation of assets is including removal of ability to proposed to apply from 8 May 2018, subject to transitional rules applicable until revalue assets off balance sheet and income years that commence on or after 1 July 2019. treat foreign controlled Australian The change to the treatment of consolidated groups is proposed to apply tax consolidated and multiple to income years commencing on or after 1 July 2019. entry consolidated groups with foreign investments or operations as both outward and inward investing entities Broadening the definition of Currently before Parliament. significant global entity (SGE) The concept of SGE is relevant for a range of tax laws including Country-by- Country reporting, Multinational Anti-Avoidance Law, Diverted Profits Tax, and penalties. Offshore Banking Unit (OBU) reforms Announced in October 2018 to address concerns raised by the OECD Forum on Harmful Tax Practices. Corporate tax Reforming the integrity provisions Draft legislation to implement the Board of Taxation’s recommended approach in the debt/equity rules to improve the debt and equity tax rules was released in October 2016. The new rules are proposed to apply in relation to transactions entered into after the commencement of the law, which will be a day to be fixed by proclamation (or if there is no proclamation, six months after Royal Assent). Better targeting the research and These reforms, which were announced in the 2018-19 Federal Budget, development (R&D) tax incentive are currently in a Bill before Parliament. The Senate Economics Legislation Committee handed down its report on the Bill in February 2019, recommending further examination and analysis of the impact of the R&D reforms be undertaken. Removing barriers to the use Originally announced in the 2016-17 Federal Budget, and proposed to apply with of asset backed financing effect from 1 July 2018. Preventing franked distributions Originally announced in the 2016-17 Mid Year Economic and Fiscal Outlook funded by capital raisings (MYEFO) and proposed to apply to distributions made after 12:00pm (AEDT) on 19 December 2016. Reforms to taxation of financial Originally announced in the 2016-17 Federal Budget. In December 2017, the arrangements (TOFA) Government announced that it will defer the commencement of this proposal until income years that begin after Royal Assent. Petroleum Resource Rent Tax Currently before Parliament and expected to be passed this week. Reforms (PRRT) reforms including measures proposed to apply from 1 July 2019. to lower the uplift rates for general expenditure and exploration expenditure and removal of onshore projects from the PRRT regime
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 18 Table 9.1: Key measure previously announced still to be legislated (continued) Measure Status Asset and wealth management Package of measures to improve the Currently before Parliament and expected to be passed this week. integrity of the law for arrangements These changes will generally take effect from 1 July 2019 (subject to transitional involving stapled structures and rules for existing investments). limit access to tax concessions for foreign investors Removal of the capital gains tax Announced in the 2018-19 Federal Budget. The start date was deferred from (CGT) discount at trust level for 1 July 2019 to 1 July 2020 in the 2018-19 MYEFO. Managed Investment Trusts (MITs) and Attribution MITs Corporate and limited partnership Draft legislation dealing with the tax and regulatory framework for corporate CIVs collective investment vehicle (CIV) has been released for public consultation. No draft legislation has been made available for the proposed limited partnership CIV. Personal tax and superannuation Taxation of income for use of an A consultation paper was released in December 2018. This measure is proposed individual’s fame and image to apply from 1 July 2019. Superannuation guarantee (SG) A Bill to implement the 12-month amnesty from 24 May 2018 is currently 12-month amnesty for historical before Parliament. underpayment of SG and increase in penalties for those that do not come forward during the amnesty Removal of CGT main residence Currently before Parliament. Proposed to apply from 7:30pm by legal time in the exemption for foreign residents ACT on 9 May 2017, with a transitional period until 30 June 2019 for dwellings held before 9 May 2017. Other measures Goods and services tax (GST) for Currently before Parliament. Proposed to apply from 1 July 2019. online bookings for accommodation in Australia Measures to deal with the black Following last year’s Budget announcement, a number of black economy economy including implementing measures have already been enacted in addition to relatively recent consultation a reporting regime for the on recommendations for a sharing economy reporting regime and also to sharing economy modernise offences, penalties and streamline prosecution processes. Denial of deductions for vacant land Draft legislation to implement this measure was released in October 2018. The measure is proposed to have effect from 1 July 2019. Improving the transparency of tax In January 2018, the Government released draft legislation for this proposal. Further debts by authorising the Australian changes to this measure were announced in the 2018-19 MYEFO, including raising Taxation Office (ATO) to disclose the threshold for reporting from $10,000 to $100,000. This measure will take effect certain business tax debts to credit the day after Royal Assent of the enabling legislation. reporting bureaus
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 19 Opposition tax policies Table 9.2: Key tax policies of Australian Labor Party With a Federal election looming, Policy area Australian Labor Party policy it would be remiss not to take into account the policies of Company The Labor Party will maintain the legislated reduction in the income company tax rate to 25 per cent by 2021-22 for small and the Australian Labor Party in tax rate medium sized-business with aggregated turnover of up to considering what the forward $50 million. tax agenda may look like. In Table 9.2, we summarise some Personal The Labor Party has proposed larger personal tax cuts than income tax those that have already been legislated for taxpayers earning of the key tax policies that rates less than $125,000 and has indicated an intention to increase have been announced by the the top marginal tax rate from 47 per cent to 49 per cent. Australian Labor Party to date. Personal tax From 1 July 2019, introduce a $3,000 cap on the amount A number of these tax policies deductions individuals can claim as deductions for the management of their were announced by the Australian taxation affairs. Labor Party prior to the 2016 Accelerated From 1 July 2021, implement a new Australian Investment election, and for some of these depreciation Guarantee, allowing businesses to immediately deduct 20 per proposals, a start date is unclear. of certain cent of the value of investment in eligible depreciating assets We may hear more on these business (including electric vehicles), with the balance depreciated in line measures from the Opposition assets with normal depreciation rates from the first year. Leader in the Budget reply Taxation of Introduce a minimum 30 per cent tax rate for discretionary trust speech scheduled for Thursday discretionary distributions to mature individual beneficiaries (aged 18 years 4 April 2019. trust and over) with effect from 1 July 2019. distributions Imputation From 1 July 2019, cash refunds of excess franking credits will reform be removed for certain individuals and superannuation funds. Australian Government pension or allowance recipients and self-managed superannuation funds which have at least one Australian Government pensioner or allowance recipient before 28 March 2018 will be exempt from this measure. Multinational Amend the thin capitalisation rules to limit the amount of debt tax avoidance deductions multinational companies can claim in Australia to the debt-to-equity ratio of a group’s entire global operations. Provide additional funding to the ATO to properly investigate and pursue multinational profit shifting. Transparency A range of additional measures to promote tax transparency are proposed including a mandatory Extractive Industries Transparency scheme for large Australian extractive companies to disclose payments (including taxes) arising from minerals exploration, prospection, discovery, development or extraction; publishing of Country-By-Country reports (excerpts); restoring the $100 million threshold for public reporting by the ATO of tax information of large private companies; and the establishment of a publicly accessible central register of beneficial ownership of Australian companies, trusts and other corporate structures. Capital Reduce the CGT discount for individuals from 50 per cent to Gains Tax 25 per cent. This is proposed to apply to assets acquired on or after 1 January 2020. Assets acquired before this date will not be affected. Negative Limit negative gearing to new housing investments. This is gearing proposed to apply to assets acquired on or after 1 January 2020. Assets acquired before this date will not be affected. Build-to-rent Reduce the MIT withholding tax rate from 30 per cent to 15 per housing cent for fund payments attributable to investments in build-to- rent housing.
Insights | PwC’s analysis of the Australian Federal Budget 2019-2020 | 20 Comprehensive tax reform Reform should also extend to remains critical Australia’s consumption tax. We need to have a much more With the Federal Budget moving sophisticated debate about towards surplus, now is the ideal where Goods and Services Tax time for our political leaders to (GST) is and isn’t applied – and step back and take a fresh look at how much GST is applied. our tax system. Australia’s social and economic future may depend Our ability to have a upon it. constructive conversation about comprehensive tax reform today In a global context, for Australia will have a direct impact on to remain internationally our living standards tomorrow. competitive for companies to PwC strongly supports the do business here, we need to development of a better tax progressively lower the corporate system for Australia, and remains tax rate. Australia’s top corporate committed to joining a national tax rate of 30 per cent is the conversation on tax reform. second highest amongst OECD nations behind only France. Although the recent reform to reduce the Australian company tax rate for small to medium companies progressively down to 25 per cent by 2021-22 is a step in the right direction, more could be done across the board, also noting that the current two-tiered company tax rate regime adds complexity to our tax system.
Contacts For further information, contact your usual PwC advisor or one of these contacts: Summary Jeremy Thorpe Pete Calleja Lynda Brumm +61 (2) 8266 4611 +61 (2) 8266 8837 +61 (7) 3257 5471 email@example.com firstname.lastname@example.org email@example.com Julie Coates Tom Seymour Craig Fenton +61 (2) 8266 2006 +61 (7) 3257 8623 +61 (7) 3257 8851 firstname.lastname@example.org email@example.com firstname.lastname@example.org Personal Tax Superannuation Indirect Taxes and Other Measures Bruce Ellis Marco Feltrin Trade Measures Liam Collins +61 (3) 8603 3303 +61 (3) 8603 6796 Michelle Tremain +61 (3) 8603 3119 email@example.com firstname.lastname@example.org +61 (8) 9238 3403 email@example.com Glen Frost Abhi Aggarwal firstname.lastname@example.org Pete Calleja +61 (2) 8266 2266 +61 (7) 3257 5193 Gary Dutton +61 (2) 8266 8837 email@example.com firstname.lastname@example.org +61 (7) 3257 8783 email@example.com Martina Crowley Alice Kase firstname.lastname@example.org Lynda Brumm +61 (8) 9238 3222 +61 (2) 8266 5506 Stephanie Males +61 (7) 3257 5471 email@example.com firstname.lastname@example.org +61 (2) 6271 3414 email@example.com Murray Evans Jeffrey May firstname.lastname@example.org Michael Dean +61 (2) 4925 1139 +61 (3) 8603 0729 Ben Lannan +61 (2) 8266 5427 email@example.com firstname.lastname@example.org +61 (3) 8603 2067 email@example.com Samantha Vidler Ken Woo firstname.lastname@example.org +61 (7) 3257 8813 +61 (2) 8266 2948 Forward Tax Agenda email@example.com firstname.lastname@example.org Employment Taxes Pete Calleja Norah Seddon Naree Brooks Katie Lin +61 (2) 8266 8837 +61 (2) 8266 5864 +61 (3) 8603 1200 +61 (2) 8266 1186 email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org Paul Abbey Global Tax Greg Kent +61 (3) 8603 6733 Corporate Tax and +61 (3) 8603 3149 email@example.com Private Business Michael Bona firstname.lastname@example.org +61 (7) 3257 5015 Lynda Brumm Sanjiv Jeraj email@example.com Paula Shannon +61 (7) 3257 5471 +61 (3) 8603 3187 +61 (7) 3257 5751 firstname.lastname@example.org email@example.com Peter Collins firstname.lastname@example.org +61 (3) 8603 6247 Jonathan Malone Samantha Vidler email@example.com +61 (2) 8266 4770 +61 (7) 3257 8813 firstname.lastname@example.org email@example.com Sach Pelpola +61 (3) 8603 1376 Ellen Thomas Simon Le Maistre firstname.lastname@example.org +61 (2) 8266 3550 +61 (3) 8603 2272 email@example.com firstname.lastname@example.org Angela Danieletto +61 (2) 8266 0973 Michael Dean email@example.com +61 (2) 8266 5427 firstname.lastname@example.org Jonathan Malone +61 (2) 8266 4770 Martina Crowley email@example.com +61 (8) 9238 3222 firstname.lastname@example.org © 2019 PricewaterhouseCoopers. All rights reserved. PwC refers to the Australia member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Liability limited by a scheme approved under Professional Standards Legislation. At PwC Australia our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with more than 250,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.au 127069081
You can also read
NEXT SLIDES ... Cancel