2019 Federal Budget Summary

Tuesday night’s Federal Budget, delivered a month early in anticipation of the upcoming Federal Election, contained a variety of measures across taxation, superannuation, social security and aged care that will affect many of our clients and their financial plans. Please note that these proposals are not yet legislated, and as always, the team at AGS Financial Group are well placed to advise you on your strategic options as these proposals progress.

Key elements of the budget include:

Personal Taxation

Tax cuts for Low and Middle Income earners

Building on the measures announced in the last budget, the Government has proposed increases to the Low and Middle Income Tax Offset (LMITO), changing the base amount from $200 to $255 per year and the maximum amount from $530 to $1,080 per year.

Taxpayers with income between $48,000 and $90,000 will be eligible to receive the maximum offset of $1,080. The offset phases out with incomes up to $126,000. This is proposed to apply form 1 July 2019, assuming the Government can legislate the changes during the April Parliamentary sitting days. The LMITO is due to end on 30 June 2022.

From 1 July 2022, the Government will extend the threshold for the 19 per cent tax rate from $41,000 to $45,000. The Government will also increase the Low Income Tax Offset from $645 to $700 per year. Taken together, these changes make up for the removal of the LMITO on 30 June 2022.

From 1 July 2024, the Government will reduce the 32.5 per cent tax rate to 30 per cent, abolish the 37 per cent tax rate and increase the threshold for the 30 per cent tax rate to $200,000. Treasury estimates these changes will result in 94 per cent of Australian taxpayers facing a marginal tax rate of 30 per cent, which will apply to incomes between $45,001 and $200,000, as per the table below.

Marginal Tax Rate (%)

Current Thresholds 2018/19

($)

Proposed

Thresholds 2018/19

($)

Proposed

Thresholds 2022/23

($)

Marginal Tax Rate (%)

Proposed

Thresholds 2024/25

($)

0

0 – 18,200

0 – 18,200

0 – 18,200

0

0 – 18,200

19

18,201 – 37,000

18,201 – 37,000

18,201 – 45,000

19

18,201 – 45,000

32.5

37,001 – 90,000

37,001 – 90,000

45,001 – 120,000

30

45,001 – 200,000

37

90,001 – 180,000

90,001 – 180,000

120,000 – 180,000

45

200,000+

45

180,001+

180,001+

180,000+

 

 

LMITO

Up to $530

Up to $1,080

Nil

LMITO

Nil

LITO

Up to $445

Up to $445

Up to $700

LITO

Up to $700

Note: excludes Medicare (2%)

Superannuation & Retirement

Improving Flexibility for Older Australians
Currently, people aged 65 to 74 must be in paid work for a minimum of 40 hours in any consecutive 30-day period in the financial year to make voluntary super contributions. This “work test” requirement does not apply to super 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 67 to 74.

People aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring forward rule.

Those up to and including age 74 will be able to receive spouse contributions, with those 65 and 66 no longer needing to meet the work test.

Protecting your Super package – Amendment
The Government has also agreed to amendments to the Protecting Your Super Package to:
• extend to 16 months the period after which an account that has not received any contribution is considered inactive;
• expand the definition of when an account is considered active for the ATO-led consolidation regime; and
• require the ATO to consolidate to an active account, where possible, within 28 days of receipt.
Also, the Government will delay the start date for ensuring insurance within superannuation is only offered on an opt-in basis for amounts with balance of less than $6,000 and new accounts belonging to members under the age of 25 years to 1 October 2019.

Social Security & Aged Care

Energy Assistance Package
The Government will provide a one-off payment of $75 for singles and $62.50 for each member of an eligible couple ($125/couple) who receive a qualifying payment on 2 April 2019 to provide relief from high energy costs.

Changing the Income Assessment model

The Government will achieve savings of $2.1 billion by simplifying and automating the reporting of employment income for social security purposes through Single Touch Payroll (STP). This measure will greatly reduce the likelihood of income support recipients receiving an overpayment. Income data received through STP will be shared with the Department of Human Services.

Aged Care

The Government will provide $320 million for a one-off increase to the basic subsidy for residential aged care recipients. $35.7 million will be provided to increase to the dementia and the veterans’ home care supplements to support home care recipients who require additional care to stay in their homes longer.

In addition, there were a number of other measures to provide additional Home Care packages, Home Support services, Dementia support, and Elder Abuse services.

Small & Medium Business

Extending Instant Asset Write-off

The Government will increase the instant asset tax write-off from $25,000 to $30,000 and make this available for medium sized businesses (those with an aggregated annual turnover of between $10 million and $50 million) as well as small businesses. Effective 2/4/2019.

Naturally, as these measures become law, we are on hand to assist you with understanding and responding to the changes. As always, please contact us should you require any advice or assistance with your plans.
 


Published : 02 Apr 2019