The 2018 Federal Budget has now been announced. As a client of Doctors Wealth, part of our ongoing service to you is to ensure that you are aware of any legislative changes that affect you.
We have summarised below the key changes that will be specifically relevant to you as a Doctor. Please feel free to forward this to any colleagues who you feel may benefit from this too.
Please remember that the changes to legislation may not get passed in the Senate and actually proceed at all.
The key changes within the Budget of potential relevance to you are:
“Driving a new era in healthcare for Australians”
A $1.4 billion boost for medical and research spending, including:
- Increase of the Medicare rebate for standard GP visits by $0.55 from 1st July 2018, ending a four year freeze.
- Listing more medicines on the PBS to help with the treatment of breast cancer, refractory multiple myeloma, and relapsing-remitting multiple sclerosis.
- Increased medical research funding.
- Funding boost to the Royal Flying Doctors Service.
For Doctors in specific areas of medicine, this should mean better patient outcomes, a slight increase in remuneration (GPs) and perhaps greater demand for medical services.
Lower Income Tax
There will be an increase in the low-income tax offset (LITO) — essentially a lump sum payment to you via your tax return.
From next July, those who earn up to $37,000 will see their tax bill reduce by $200, with the offset increasing incrementally for those earning between $37,000 and $48,000, before the maximum offset of $530 is applied to those earning between $48,000 and $90,000. The benefit then gradually decreases to zero at a taxable income of about $125,000.
There will also be a measure to combat income tax bracket creep, introduced in stages. From 1st July 2018, those earning between $87,000 and $90,000 will move back into the lower tax bracket and pay 32.5 per cent instead of 37 per cent in tax.
By 2024-25, that threshold will be eliminated and those earning $41,001 to $200,000 will face a top tax rate of no more than 32.5% (plus the Medicare Levy), as per below:
|$0 – $18,200||Nil||$0 – $18,200||Nil|
|$18,201 – $37,000||19%||$18,201 – $41,000||19%|
|$37,001 – $87,000||32.5%||$41,001 – $200,000||32.5%|
|$87,001 – $180,000||37%||$200,000 +||45%|
High-income earners will receive some minor tax relief. However, Doctors who are early in their training, and lower earning partners and family members will benefit most from the income tax changes.
Good news regarding what was not in the Budget
Although these cost savings won’t affect the hip pocket, these measures are welcome news:
- The planned 0.5 per cent increase to the Medicare Levy to fund the NDIS has been scrapped. Negative gearing and the capital gains tax discount on investment properties and other investment assets have not been curbed. The franking credits cash refund remains.
- Furthermore, the government is funding its largesse through measures such as cracking down on welfare overpayments and targeting the black economy, rather than increasing taxes and levies on working Australians.
Extension of the $20,000 instant asset write-off for small businesses
The $20,000 instant asset write-off for the purchase of assets worth up to $20,000 in the year of purchase will be extended by another 12 months. This should include most self-employed Doctors.
So long as you satisfy the eligibility criteria, you will be able to immediately deduct the purchase of eligible assets costing less than $20,000 where they are first used or installed ready for use by 30 June 2019 e.g. medical or computer equipment. After that date, the immediate deductibility threshold will revert back to $1,000.
Self Managed Superannuation Funds (SMSFs) member limit to increase from 4 to 6
The Budget confirmed that the maximum number of allowable members in new and existing self-managed superannuation funds (SMSFs) will be expanded from 4 to 6 members from 1 July 2019.
The proposed increase to the maximum number of SMSF members seeks to provide greater flexibility for families to jointly manage their wealth for retirement.
Good news for families to assist them implement intergenerational wealth solutions for managing long-term, capital intensive investments, such as commercial property and private practice/business premises. However, as each member must be a trustee of the fund, a decision to add extra members should not be taken lightly, as it can add complexity to the fund’s management and investment strategy.
Exit fees from superannuation funds will be abolished, making it easier to consolidate superannuation accounts
Administration and investment fees on accounts with balances under $6,000 will be capped at 3 per cent (of the balance). The ATO will be supported to proactively consolidate any inactive super accounts a taxpayer has with their active account, where possible.
This is good news for those with multiple smaller super accounts.
As with any change in the legislation, there are still, and always will be, strategies to make the most of the changes, and even emerge in a better financial position than before.
If you have any queries, please feel free to contact us to discuss.
Alternately, we can discuss any of the above at our next meeting, or one of the Doctors Wealth accountants can discuss this with you as part of your tax return and tax planning meeting later this year.