2018/19 Federal Budget
The 2018/19 Federal Budget, handed down by the Treasurer on 8 May, focused on reducing personal income tax. The plan aims to be released in stages, with tax relief for low and middle income earners proposed to start from 1 July 2018. Some of the other proposals to watch out for include a change to the treatment of super balances below $6,000. There is more detail below.
Of the many announcements made, the following are the major Government proposals that we believe will be of interest to you, our members and clients.
The following proposals have been earmarked to take effect over the next seven years:
- From 1 July 2018, the Government will raise the upper threshold of the 32.5 percent personal income tax bracket from $87,000 to $90,000. This is part of an extended plan to simplify the tax system by reducing the number of tax brackets to four by 2024.
- A Low and Middle Income Tax Offset will be introduced in the 2018/19 financial year. This offset will provide low and middle income earners with a maximum offset of $530 per annum. This offset may be received as a lump sum on assessment after an individual lodges their tax return.
|Taxable Income||Offset benefit|
|$37,000 – $48,000||$200 increase at 3 cents per dollar to a maximum of $530|
|$48,000 – $90,000||$530|
|$90,001 – $125,333||Phase out at 1.5 cents per dollar|
The benefit of the offset is in addition to the existing Low Income Tax Offset (LITO).
- The Medicare levy rate will no longer be increased from 2.0 to 2.5 per cent of taxable income from 1 July 2019.
- The Small Business $20,000 instant asset write-off will be extended by a further 12 months to 30 June 2019 for businesses with aggregated annual turnover less than $10 million. Small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019. Only a few assets are not eligible for this tax write-off (such as horticultural plants and in-house software).
The following is proposed to take effect from 1 July 2019:
- All inactive superannuation accounts under $6,000 will be transferred to the ATO. The best way to avoid this is to start contributions to your account. Intrust Super members can set up a direct debit of as little as $20 per month. This would remove the likelihood of an account being transferred to the ATO.
- Super funds will need to provide a new retirement income framework that offers comprehensive income products for retirement. This will include simplified, standardised information and new means test rules for pooled lifetime income streams.
- A limited, one-year exemption from the work test will be introduced for voluntary super contributions for people aged 65-74 with superannuation balances below $300,000.
- The Government will allow high-income earners with multiple employers to nominate wages from particular employers to be exempt from the superannuation guarantee. This will help these individuals avoid breaching the concessional contributions cap.
These measures are proposed to commence from 1 July 2019:
- The Pension Work Bonus will be increased from $250 to $300 per fortnight, to allow pensioners to earn up to $7,800 each year without impacting their pension.
- The Pension Work Bonus will be extended to allow self-employed retirees to earn up to $300 per fortnight without impacting their pension.
- The Pension Means Test rules will be amended to encourage the development and take-up of lifetime retirement income products. This could help retirees manage the risk of outliving their savings.
Commencing in the 2018/19 financial year:
- The Government will implement new policies to help people to stay at home longer, remain healthy and independent for longer, and to improve access to high quality and safe aged care.
A reminder that these are only proposals at the moment, and become law only if passed by both houses of Parliament and receives royal ascent.
If you have any questions, please speak with your Intrust360° financial adviser or call us on 132 467 between 8 am and 8 pm [AEST], Monday to Friday.