Focus for tax agents
Tax agents now need to focus on the Coalition’s agenda that was mainly announced in the federal budget on 2 April. The key points of this agenda include:
- Increasing the low and middle income tax offset to a maximum offset of $1,080 for the years ending 30 June 2019, 2020, 2021 and 2022. Tax agents need to ready themselves for the influx of individuals wanting their tax return lodged early so that they can gain access to the refund that is due to them. (However, at the time of writing there may be some delays in the payment of the full refund due to the legislation not being passed).
- Increasing the instant asset write off threshold to $30,000. (This law has already been enacted).
- Removing the work test for people aged 65 and 66 from 1 July 2020.
- Extending the eligibility for bring forward contributions to those aged 65 and 66 from 1 July 2020.
- Increasing the age for spouse contributions from 69 to 74.
Further, it will be interesting to see if the Coalition Government once again tries to extend the maximum number of members in an SMSF to six.
At the time of writing, the exact make up of both Houses of Parliament was not known. Whatever the government proposes now, or in the course of the new Parliament, will need to run the gauntlet of the Opposition, independents and minor parties.
It will be interesting to see whether legislation is passed, or the eventual detail of legislation when it does pass through the legislative process in both Houses of Parliament.
Unfortunately, this will continue to create uncertainty when advising clients. It can be several months between a government announcement to change the law and the final version of the law. This is particularly so when the government may be facing a hostile Parliament. In the meantime, tax agents have clients asking what they should do.
Other tax matters to watch
Tax agents will be closely watching the proposed changes to Division 7A. These are now to apply from 1 July 2020. We consider it likely that the announced changes will not be enacted exactly as proposed. There is still a long way to go before we know what the “new” Division 7A will look like.
Now that the Opposition’s proposal to put a 30% tax on the distribution from trusts is dead, perhaps the government will finally get around to completing its review of the taxation of trusts. This much-needed review has dragged on and virtually come to a standstill. Perhaps, in the course of this Parliament, the government may finally decide to deal with this thorny issue.
Tax agents will also need to be alert to any new changes that the Coalition Government may announce. As a general statement, the more unpalatable tax changes will be introduced earlier in a parliamentary term than later. So, the challenges for tax agents will remain.
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