The 2019 Federal Budget outlined the LNP’s plans for the financial future of Australians, and this gives us the best indication of what to expect as the government rolls out its plans.
Those that are at retirement age, or nearing it in the coming years, are expected to see big benefits, as well as those who earn a low and middle income.
We’ve broadly outlined the key points below but, if you’d like advice about how these changes could impact you personally, please contact one of our friendly advisors on 1800 444 396
Note: These changes are proposals only and are subject to legislation and regulations.
The first benefit for many Australians relates to energy costs. For those feeling the pinch of their energy bills, nearly four million Australians can expect to receive a one-off payment of $75 for singles and $125 for couples (combined) to assist with energy bills. Those that are eligible for this payment will primarily be people who are currently receiving welfare payments or pensions.
In terms of tax, most Australians can expect more money in their pocket.
The low and middle-income tax offset (LIMTO) will provide anyone earning between $48,000 and $90,000 per year with a lump sum of up to $1,080 per person. Those earning $90,000 to $126,000 per year will also receive a tax offset, although it will be smaller.
These offsets are to be delivered to taxpayers in their 2018/2019 tax returns and are projected to continue for the following three financial years. As well as these lump sum payments, there will be some changes to tax brackets that will affect how much you are taxed.
From 1 July 2022, the 19 per cent tax bracket is proposed to increase from $41,000 to $45,000 with an increase in the low-income tax offset from $645 to $700. From 1 July 2024, the current 32.5 per cent marginal tax rate is proposed to drop to 30 per cent for income between $45,000 and $200,000. This will mean that 94 per cent of taxpayers will have a marginal tax rate of 30 per cent or lower.
The timing of the planned tax changes is dependent on legislation successfully passing.
Superannuation will see some changes, particularly for older Australians. One major change is to non-concessional contributions. These are voluntary contributions made from your after-tax income, and there is currently a cap on how much can be contributed to your super fund in one financial year using this method.
Currently, if you’re aged between 65 and 74, you can only make voluntary super contributions if:
- you are in paid employment, and;
- you meet a ‘work test’. This means you must work a minimum of 40 hours over a 30-day period during that financial year.
However, the work test will be scrapped for people aged between 65 and 66 from 1 July 2020. This means that they will be able to make voluntary contributions to super without meeting the work test, aligning these rules with the increased age pension from 65 to 67 years old from 1 July 2023.
You can also expect changes to the bring-forward rule. The bring-forward rule allows Australians under the age of 65 to make up to three years’ worth of non-concessional superannuation contributions in one financial year. This age will be increased to 66, meaning that anyone aged 66 and under will be able to make three years’ worth of non-concessional contributions to their superannuation in a single year, capped at $100,000 per annum.
The government’s plans will also focus on assisting low-income earners with increasing their super balance. For people who are earning up to $40,000 per year, their partners can make a spouse contribution to their superannuation. Currently, those aged 70 and over cannot receive spouse contributions even if they were to satisfy the work test. However, from 1 July 2020, the age limit for people to receive contributions made by their spouse will increase from 69 years old to 74 years old.
At this stage, it’s important to keep in mind that these changes are only proposed. Even though the government has now been elected, these legislative changes must pass through the usual procedures before they are implemented.
If you have any questions about how the planned changes could affect you, please get in touch with us by calling 1800 444 396.