22 May 2020
On April 2nd, Federal Treasurer Josh Frydenberg released his government’s budget. While predicting a small deficit this year, the forecasts included a budget surplus of $7 billion in 2019/20, after 12 years of deficits. The budget is most noticeable for promised tax cuts and infrastructure spending.
Some of the major announcements in the 2019 Federal Budget included:
The big expenditure item in the budget is a forecast $300 billion in personal income tax cuts over the next 10 years;
- The low and middle-income rebate is set to be doubled from 1 July 2019. This will mean a tax saving for anyone earning under $126,000 pa. This measure could save individuals up to a maximum of $1,080 pa and up to $2,160 pa for dual income families.
- The government will increase the low-income thresholds for the Medicare levy, to keep pace with inflation, and ensure low-income taxpayers can remain exempt from paying this levy.
- Longer term, the top threshold for the 19% tax bracket will go from $41,000 to $45,000 on 1 July 2022. In 2024/25 the current 32.5% tax rate for middle-income earners is set to be reduced to 30%. At the same time, the 37% marginal rate will be abolished meaning that 96% of taxpayers will pay no more than a 30% top marginal rate.
- Small & medium business will have instant asset write-off increased to $30,000 (from $25,000) and this will be extended to businesses with a turnover of up to $50 m (up from $10m).
The superannuation sector has avoided any major changes, with the focus on flexibility and cutting of red tape.
- As announced pre-budget, the government will allow Australians up to 67 years old to contribute to super without meeting a work test from 1 July 2020. This brings contributions in line with the age pension age. It also means that those aged 65 and 66 will be eligible to do a three year bring forward of non-concessional contributions.
- Also, the Government is increasing the spouse contribution age limit to 74, with those 65 and 66 no longer needing to meet a work test.
- There will be a streamlining of the way in which Exempt Current Pension Income is calculated by Self Managed Super Funds, providing trustees more choice and reducing the administrative burden.
- The government has proposed changes to the timeframe before a super account is inactive, increasing it to 16 months after no contributions are made. The definition of inactive accounts will also be broadened and the ATO will be required to consolidate inactive accounts within 28 days.
- The requirement for SMSF rollovers to be done via the SuperStream system will be delayed until 31 March 2021, from November 2019.
Social Security & Aged Care
- A one-off energy assistance payment will be made to social security recipients by 30 June. This will be an amount of $75 for singles and $125 for couples.
- Over five years, the government will look to increase the number of home care packages by 10,000. They will also provide $320 million for a one-off increase to the basic subsidy for residential aged care recipients.
If you need any assistance with how these budget announcements may affect your situation, please contact your Elston adviser on 1300 ELSTON.