Our summary of the Federal Budget from a wealth management perspective – covering income tax, superannuation, retirees, and social security.
Personal Income Tax Plan – 7 Year Plan
From 1 July 1, 2018 the 32.5 per cent top threshold will increase to $90,000.
From 2018-19 financial year through to 2021-22 financial year a new tax offset of $530 will be available for low and middle income earners in addition to the Low Income Tax Offset (LITO) of $445.
From 2022-23 the 19pc top threshold will increase from $37,000 to $41,000; and the LITO of $445 will increase to $645.
From 2022-23 the 32.5pc top threshold will increase to $120,000.
From July 1, 2024 the 37pc tax bracket will be abolished completely, reducing the number of tax brackets from five to four; and the top marginal tax rate of 45pc will apply to incomes above $200,000.
The above changes will ensure Australians earning more than $41,000 will only pay 32.5pc up to the top marginal tax rate; and will address tax bracket creep for the future
Other Taxation Measures – The $20,000 instant write-off for small businesses with turnover of up to $10 million will be extended for a further 12 months, to June 30, 2019.
Protecting Your Super Package – Commencing July 1, 2019 the ATO will be given capacity to actively reunite Australians with their lost and inactive superannuation. This will help minimise account balance erosion via fees for those with multiple super accounts. Inactive accounts below $6000 will be transferred to the ATO to protect from further erosion, and data matching will be used to connect with the member’s active accounts.
Fees will be capped on super accounts with balances less than $6000 at 3pc. Superannuation fund exit fees will be banned if the member is changing super providers.
Life insurance cover in superannuation for young savers under age 25 will be changed to an "opt-in" basis. Currently it is via an "opt-out" basis.
One Year Work Test Exemption – Australians aged 65 to 74 will be given a 12 month exemption from the superannuation work test to help boost retirement savings. The 12 months commences from the end of the financial year in which they last met the work test.
This exemption will apply where an individual’s total superannuation balance is below $300,000. This will allow voluntary superannuation contributions to be made in the first year following retirement. Existing concessional and non-concessional contribution caps will apply in addition to the person being able to use any carry-forward "catch up" concessional contributions.
Super Guarantee Contributions for High Income Earners – From July 1, 2018 some high income earners (above $263,157) with multiple employers will be able to nominate that their wages are not subject to Superannuation Guarantee. This will reduce the number of people who breach the $25,000 cap on concessional contributions.
Notice of Intent for Personal Deductible Contributions – From July 1, 2018 individuals will be required to confirm in their income tax returns that they have complied with “notice of intent” requirements in relation to their personal superannuation contributions.
Increasing Maximum Member Number to Six for SMSFs & Small APRA Funds (SAFs) – The Government announced before the Budget their intention to increase the maximum number of members permitted within a self managed superannuation fund from four to six.
Retirement & Social Security
Pension Work Bonus – An expanded Pension Work Bonus will allow age pensioners to earn up to $300 per fortnight, an increase of $50 per fortnight from the existing $250, without reducing their pension payments. Therefore, a single person with no other income will be able to earn up to $468 per fortnight from work and retain eligibility for the full Age Pension.
The bonus will also be extended to self-employed individuals, who will now be able to earn up to $7800 per year without reducing their pension payments.
Jobs and skills for older Australians – The Government will provide up to $10,000 in wage subsidies for employers who employ Australians aged 50 and over. The Skills and Training incentive will provide up to $2000 to fund up-skilling opportunities for mature aged workers identified as being at risk.
- Boh Burima Financial Adviser | Authorised Representative: 000341081 Morgans Financial Limited | ABN 49 010 669 726 | AFSL 235410