Ahhhhhh, the new financial year.
This is the time of year where the government often likes to introduce a lot of changes to tax, finances and small businesses.
Where they start yelling out numbers and dates, and throwing around percentages.
But just what do they mean for you?
Well, we’ve put together a little bit of a summary of changes that came into place from July 1st for the 2019/2020 Financial Year that may
affect business owners.
Private Health Insurance Statements
Your private health insurer isn’t going to send you an insurance statement. They might, but what used to religiously come out by the 15th of July every year is now optional. It will now be accessible in the pre-fill report by Mid-August, otherwise you will need to request it from your private health insurer.
Low and middle income tax offset
If your taxable income is less than $126,000, you will get some of the low and middle income tax offset.
The amount of the offset you are entitled to will depend on your individual circumstances, such as your income level and how much tax you have paid throughout the year.
The maximum offset is $1080 per annum. The base amount is $255 per annum.
It doesn’t mean that you will get an extra $1,080 in your tax return.
If your taxable income:
- does not exceed $37,000, you will be entitled to an offset amount of $255 on your tax payable.
- exceeds $37,000 but is not more than $48,000, you will be entitled to an offset amount of $255, plus 7.5% of the excess above $37,000 to a maximum offset of $1,080 on your tax payable.
- exceeds $48,000 but is not more than $90,000, you will be entitled to the maximum offset amount of $1,080 on your tax payable.
- exceeds $90,000 but is not more than $126,000, you will be entitled to an offset amount $1,080 less 3% of your taxable income above $90,000.
Single Touch Payroll
A big change that is being rolled out as of July 1st for all employers (those of you who a larger businesses would already be used to this, as it was implemented for you earlier).
This is the new way of reporting tax and super information to the ATO.
This means that your employees can now access their up-to-date year-to-date tax and super information through myGov. This is also where they can access their payment summaries, which you as the employer no longer have to supply to them. These are referred to as ‘income statements’ in myGov. Through this site it will also tell them when their income statement is ‘Tax Ready’, which they can then use to complete their tax return.
When you process the pay run you will notice that there is now a ‘File’ option, which will ask you to read and accept the Authorisation to file, and you can then submit it to the ATO.
The ATO are now going to be able to keep track of employee income and super payments throughout the year, not just at the end of the quarter or year.
The pay run cannot be undone once it has been filed with the ATO, and any errors have to be amended using an additional pay run.
New Minimum Wage
The minimum wage has increased by 3% from July 1st, or in other words from $719.20 per week to $740.78 per week based off a 38 hour week.
This pay rise applies to those whose pay rates are set by the national minimum wage or from a modern award. If you have employees that are already paid above these limits, then they don’t require an increase.
You can use this calculator from Fair Work to see if any of these changes have affected the award for your industry.
Child Care Subsidy Rates
This subsidy is designed to help working parents get back to work and help out with the cost associated with childcare. The subsidy contribution is based off the families combined income. The thresholds upon which it is based have had some slight changes.
2019 – 2020 CCS family income thresholds | Subsidy per cent (of actual fee charged or relevant hourly rate cap, whichever is lower) |
Up to $68,163 | 85% |
More than $68,163 to below $173,163 | Decreasing to 50% |
$173,163 to below $252,453 | 50% |
$252,453 to below $342,453 | Decreasing to 20% |
$342,453 to below $352,453 | 20% |
Equal to or above $352,453 | 0% |
Family Tax Benefits for high-income earners
The Family Tax Benefit is paid either per child, or per family and is based off the families circumstances as well as their main source of income, and is designed to help families with the cost associated with raising children (which we all know doesn’t come cheap.)
The threshold which this benefit applies to has risen from $94,316 to $98,988 from July 1st. For families earning above this tax bracket this benefit is reduced by 30% for every dollar earned over this amount.
Motor Vehicle Expenses
The cents per kilometre for work related motor vehicle travel has risen to $0.68 cents per kilometre from July 1 2019 from $0.66 in the previous years. There is a maximum of 5,000km, totalling $3,400 which can be used as a tax deduction for work related car expenses.
HELP Repayments
The HELP Repayments thresholds have been changed and the minimum income increased to $51,957 from where you will have you start re-paying your HECS debt
Rate of Repayment | HELP Repayment Income |
Nil | $0 – $51,956 |
2% | $51,957 – $57,729 |
4% | $57,730 – $64,306 |
4.5% | $64,307 – $70,881 |
5% | $70,882 – $74,607 |
5.5% | $74,608 – $80,197 |
6% | $80,198 – $86,855 |
6.5% | $86,856 – $91,425 |
7% | $91,426 – $100,613 |
7.5% | $100,614 – $107,213 |
8% | $107,214+ |
- From 1 July 2017, taxpayers living overseas and earning income that exceeds the minimum repayment threshold will be required to make compulsory repayments towards their
- The relevant repayment rates and thresholds outlined above have been amended to include the introduction of a lower minimum repayment threshold and a maximum repayment rate of 10%. These changes will commence in the 2019/20 income y
Instant Asset Write-Off
We all know that the Instant Asset Write-Off for small businesses rose from $20,000 to $30,000 for small businesses. This is also the case for businesses with turnovers’ from $10 million to less than $50 million. This is applicable for assets purchased from 7:30pm on the 2nd of April 2019. You must still meet the SBE tests to apply.
Working Holiday Makers
If you are an individual working in Australia on a Working Holiday Visa (417) or a Work and Holiday Visa (462) the first $37,000 of your income will be taxed at 15%, and then open to ordinary tax rates for the income you earn over that.
Working Holiday Taxable Income1 $ | Tax Payable1 |
0 – 37,000 | 15% of the entire amount |
37,001 – 90,000 | $5,550 + 32.5% of excess over $37,000 |
90,001 – 180,000 | $22,775 + 37% of excess over $90,000 |
180,001+ | $56,075 + 45% of excess over $180,000 |
1 Medicare levy is not payable by WHMs that are non-residents for tax purposes.
Super Concessional & Personal Contributions
You can now claim personal super contributions to your super fund or retirement savings account up to the amount of $25,000. Going over this cap will mean you are open to other tax requirements.
You are eligible for this deductions if you are receiving your income from one of the following sources:
- Salary and wages
- A personal business (eg. Self-employed contractors or freelancers)
- Investments (inc. interest, dividends, rent and capital gains)
- Government pensions or allowances
- Super
- Partnership or trust distributions
- A foreign source
The catch is that you have to provide a valid notice of intent to your super fund or retirement savings account, and it has to be acknowledged by your fund, in writing, so make sure to get that pen to paper!
So what do you think about the changes?
Are you happy about them?
Is there something in there that is going to help you out?
We sure do hope so.
And on a very related side note, to help get an idea of your income breakdown for the 2019/2020 financial year, what kind of tax your expected to personally pay and what kind of tax offsets you’re eligible for, check out this handy calculator from Salary Calculator Australia.
*This advice is for general purposes only. Give us a call and we can talk specifically about the most tax effective strategies to help you minimise your tax.