FEDERAL BUDGET 2019-20 – WHAT IT MEANS FOR YOU
By Paul Nicol
Last night the Federal Government handed down its Budget for 2019–20. With only a month to go until the Federal Election, it is unsurprising that the announcements centred on election-friendly promises such as tax-cuts and increased funding to Healthcare and Aged Care services. Fortunately, there was not too many proposed changes to Superannuation. Here is a summary of the Budget pledges from last night:
Personal Income Tax Cuts
The Government has announced it will extend the personal income tax cuts that were announced and legislated after last year’s Federal Budget. The extended personal income tax cuts are as follows:
From 1 July 2018 to 30 June 2022:
An increase in the Low and Middle Income Tax Offset (LMITO) from a maximum of $530 to $1,080 ($2,160 for dual income families). The LMITO (which is in addition to the Low Income Tax Offset) will be received after individuals lodge their tax return for the relevant income years.
From 1 July 2022:
In addition to the Government’s comprehensive 7-year personal income tax plan announced in the 2018 Budget, the upper threshold for the 19% tax bracket will increase from $41,000 to $45,000, and the Low Income Tax Offset (LITO) maximum amount will increase from $645 to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000. LITO will then be reduced at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
From 1 July 2024:
The 32.5% marginal tax rate will be reduced to 30%. The 37% tax bracket will also be abolished as per the Government’s already legislated plan from the 2018 Budget.
The new proposed marginal tax rates and thresholds are as follows:
|2018-19 to 2023-24|
|Nil||Up to $18,200||Up to $18,200|
|45%||Above $180,000||Above $180,000|
|From 1 July 2024|
|Tax Rates||2024-25 Onwards|
|Nil||Up to $18,200|
The tax savings from 1 July 2022 are significant. The following graphs illustrate the already legislated tax savings from the 2018 Budget plus the proposed additional tax savings:
Increasing the Medicare Levy Low-Income Thresholds Effective 1 July 2018
The Government will increase the Medicare Levy low-income thresholds for singles, families, and seniors and pensioners from the 2018-19 income year. The following table compares the level of taxable income below which no Medicare Levy is payable:
|Taxpayers entitled to seniors and pensioners tax offset (SAPTO)|
|Married or sole parent||$48,385||$49,304|
|All other taxpayers|
|Couple/sole parent (family income)||$37,089||$37,794|
Increased and Expanded Access to the Instant Asset Write-Off Effective 2 April 2019 to 30 June 2020
The Government is proposing to increase and expand access to the instant asset write-off from Budget night until 30 June 2020 as follows. These changes are in addition to a measure announced on 29 January 2019 that is currently before Parliament and is yet to be legislated:
- Increasing the instant asset write-off threshold from the proposed $25,000 to $30,000 for small businesses (with an aggregated annual turnover of less than $10 million)
- Expanding the instant asset write-off measure to medium-sized businesses with aggregated annual turnover of $10 million or more, but less than $50 million
This means both small businesses and medium-sized businesses can immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from Budget night to 30 June 2020. Medium-sized businesses must also acquire these assets after Budget night to be eligible, as they have previously not had access to the instant asset write-off. The $30,000 threshold applies on a per asset basis, which means that eligible businesses can instantly write-off multiple assets.
|Small businesses (with aggregated turnover of less than $10 million)|
|Until 28 January 2019||$20,000|
|From 29 January 2019 to Budget night)||$25,000|
|From Budget night to 30 June 2020||$30,000|
|Medium sized businesses (with aggregated turnover of $10 million or more but less than $50 million)|
|From Budget night to 30 June 2020||$30,000|
Superannuation Contribution “Work Test” to now apply from Age 67
Currently, people aged between 65 to 74, must be in paid work for a minimum of 40 hours in a consecutive 30-day period in the financial year to make voluntary superannuation contributions. This “work test” requirement does not apply to superannuation contributions made before age 65. The Government is proposing to change the application of this “work test” so that, from 1 July 2020, the “work test” will only be necessary where contributions are made by clients aged between 67 to 74. The Government has said that this is to align the “work test” requirement with the eligibility age for the Age Pension, which is scheduled to reach 67 from 1 July 2023. This proposed change means that people aged 65 or 66 who do not meet the “work test” because they, for example, only work one day a week, or do volunteer work, will be allowed to make voluntary superannuation contributions. This change will enable more clients to make both concessional and non-concessional contributions. The standard concessional and non-concessional superannuation contribution caps will still apply. The proposed implementation date is 1 July 2020.
Moving the Non-Concessional Contribution Cap Bring-Forward to Age 67
The Government is proposing to extend the non-concessional contribution “bring-forward” rules. These bring-forward rules currently allow people aged less than 65 at the start of the financial year to make up to three years’ worth of non-concessional contributions to their superannuation in a single financial year. From 1 July 2020, the bring-forward rules will be extended, so they also apply to people aged 65 and 66 at the start of the financial year. The proposed implementation date is 1 July 2020.
Spouse Superannuation Contributions – Increased Age Limit
Currently, those aged 70 years and over cannot receive contributions made by their spouse on their behalf. The Government is proposing to increase the age limit for spouse superannuation contributions from 69 to 74 years. It is expected that the receiving spouse will be required to continue to meet the “work test” from the “work test”-age (see above). Spouse superannuation contributions are counted towards the receiving spouse’s non-concessional contribution cap. The proposed implementation date is 1 July 2020.
Additional Residential Care Places
The Government proposes additional funding for residential Aged Care by adding 13,500 residential care places.
Release of Additional Home Care Packages
The Government will provide funding from 2018-19 over five years for the release of an additional 10,000 home care packages across the four package levels. This would bring the total of additional home care packages introduced since 2017-18 to 40,000.
Increase to the Dementia and Veterans’ Home Care Supplements
The Government proposes an increase to the dementia and veterans’ home care supplements from 2018-19 over five years. This measure aims to assist eligible home care recipients who require additional care to stay in their home longer. The veterans’ home care supplement provides additional funding for veterans with a mental health condition accepted by the Department of Veterans’ Affairs (DVA) as related to their service. The dementia and cognition supplement provides additional funding to acknowledge the extra costs of caring for people with cognitive impairment associated with dementia and other conditions.
Commonwealth Home Support Programme
The Government will extend funding for the Commonwealth Home Support Programme (CHSP). The CHSP is entry level support services and personal care at home. The CHSP can include services such as meals, nursing care, home maintenance, home modifications, aids and equipment (e.g. mobility aids) and/or community transport to assist older people to keep living independently in their own home.
One-Off Energy Payment
A one-off payment of $75 for singles and $62.50 for each eligible member of a couple will be made to assist with the cost of energy bills. To be eligible, an individual must be a resident in Australia and be eligible for a qualifying payment on 2 April 2019. Qualifying payments are:
- Age Pension
- Disability Support Pension
- Carer Payment
- Parenting Payment (Single)
- Veterans’ Service Pension
- Veterans’ Income Support Supplement
- Veterans’ Disability Payments
- War Widow(er)s Pension, and
- Certain permanent impairment payments.
The payment will be tax-free and not counted as income for social security purposes. It is expected that payment will be made during June 2019.
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