This year’s Federal Budget was announced on Tuesday 2nd April. An ‘election budget’ with future tax cuts for all Australians, especially low- and middle-income earners. Overall, there were minimal changes to super proposed in the Budget, with minor tweaks to super contributions for older Australians.
Key points From The Budget Announcement
- The upper personal income tax threshold for the 19% tax rate will increase to $45,000 from 1 July 2022.
- The 32.5% tax rate will reduce to 30% from 1 July 2024.
- Increase to the age at which people can contribute to super without meeting the work test.
- A one-off energy assistance payment of $75 for people receiving government assistance.
- Increase to the tax offset for low- and middle-income earners.
Superannuation contributions for older Australians
From 1 July 2020, there will be no work test for people aged 65 and 66 when making concessional and non‑concessional contributions. Current legislation requires you to work at least 40 hours over a 30-day period to contribute.
Additionally, the 3-year bring-forward for non-concessional contributions is proposed to be extended to people aged 65 and 66. This means they could contribute up to $25,000 concessional and $300,000 in non-concessional contributions in one year.
Protecting Your Super Package
In March 2019, the Protecting Your Super Package legislation passed. This means:
- administration and investment fees will be capped at 3% if you have a super balance of below $6,000
- you will no longer be charged an exit fee from 1 July 2019
- insurance cover will cease if your account has been inactive for 16 consecutive months
The proposal to only offer insurance on an opt-in basis for accounts with balances of less than $6,000 and new accounts belonging to members under the age of 25, did not pass into legislation. The Government will delay the start date for this measure until 1 October 2019.
From 1 July 2020, the age you can continue to receive spouse contributions will increase from 6 to 74, if the work test is met. This will help couples equal up their super balance as they near retirement.
Personal income tax cuts
The Government proposes the following personal income tax rates:
- From 1 July 2022, the upper threshold of the 19% tax bracket will increase from $41,000 to $45,000 and the low-income tax offset (LITO) will increase from $645 to $700.
- From 1 July 2024, the 32.5% tax rate will reduce to 30%.
Proposed personal tax rates and thresholds
|Tax rate||Current Threshold||Threshold from
1 July 2022
1 July 2024
|Nil||0 – $18,200||0 – $18,200||0 – $18,200|
|19%||$18,201 – $37,000||$18,201 – $45,000||$18,201 – $45,000|
|32.5% until 30 June 2024
30% from 1 July 2024
|$37,001 – $90,000||$45,001 – $120,000||$45,001 – $200,000|
|37%||$90,001 – $180,000||$120,001 – $180,000||–|
|Low and middle income tax offset (max||$1,080||–||–|
|Low and middle income tax offset (max||$455||$700||$700|
To help you estimate the tax benefits for your level of income, refer to the Government’s online calculator.
Low- and middle-income tax offset (LMITO)
The low- and middle-income tax offset (LMITO) will increase for the 2018/19 to 2021/22 financial years. After this, LMITO is no longer available. The maximum LMITO will increase from $530 to $1,080.
Medicare levy low income thresholds
The Medicare levy low income thresholds will be increased to reflect movements in the consumer price index (CPI) from 1 July 2018.
Enhancements to the instant asset write‑off
Small or medium businesses can immediately deduct eligible assets costing less than
$30,000. The assets must be first used or installed, ready for use, between 7:30pm (AEDT) on 2 April 2019 and 30 June 2020.
Assets acquired between 29 January 2019 and before 7:30pm (AEDT) on 2 April 2019 are subject to a $25,000 threshold and is limited to small businesses.
The instant asset write-off had been expanded to medium businesses by increasing the annual turnover threshold from $10 million to $50 million. However, certain assets are not eligible.
Additional Home Care packages
The Government will provide funding for an additional 10,000 Home Care places over five years from 2018/19 financial year.
Energy Assistance Payment
A one-off Energy Assistance Payment of $75 for singles and $125 per couple. To be eligible, you must be receiving a qualifying Government payment on 2 April 2019 and be resident in Australia. Qualifying payments are the:
- Age Pension
- Carer Payment
- Disability Support Pension
- Parenting Payment Single
- the Veterans’ Service Pension and the Veterans’ Income Support supplement
- Veterans’ disability payments
- War Widow(er)’s Pension
- Permanent impairment payments under the Military Rehabilitation and Compensation Act 2004 (including dependent partners) and the Safety, Rehabilitation and Compensation Act 1988.
Partner service pension
Both former spouses and former de-facto partners of veterans will be able to continue to receive the partner service pension after their relationship with their veteran partner has ended, including situations where the relationship has ended because of family or domestic violence.
The information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. The views expressed in this publication are solely those of the author; they are not reflective or indicative of licensee’s position, and are not to be attributed to the licensee. They cannot be reproduced in any form without the express written consent of the author. Elliot Watson Financial Planning Pty Ltd and its advisers are Authorised Representatives of RI Advice Group Pty Ltd, ABN 23 001 774 AFSL 238429.