Illustration: John Shakespeare
Last night the Treasurer Josh Frydenberg realised his first budget focusing on reducing the tax burden for the majority of working Australians, greater superannuation flexibility for retirees and a one-off energy relief payment for eligible income support recipients.
It must be remembered that this is an election budget and the government will not have time to see these measures pass before the election is called.
A summary of the proposed changes is outlined below.
Note: These changes are proposals only and may or may not be made law.
Personal tax savings
Immediate tax relief
Low and middle-income earners will receive a tax saving of up to $1,080 per person. This can be claimed in the 2018/19 tax return.
Preservation of tax relief for low and middle income earners
From 1 July 2022, the 19 per cent tax bracket will increase from $41,000 to $45,000, with an increase in the low-income tax offset from $645 to $700.
Reduction in key marginal tax rate
From 1 July 2024, the current 32.5 per cent marginal tax rate will drop to 30 per cent for income between $45,000 and $200,000.
Minimisation of bracket creep
The government estimates that from 1 July 2024, 94 per cent of taxpayers will have a marginal tax rate of no more than 30 per cent.
Greater superannuation flexibility for retirees
Changes to voluntary super contributions
Australians aged 65 and 66 will be able to make voluntary super contributions without meeting the Work Test – removing the need for people of this age to work a minimum 40 hours over a 30-day period.
Increasing age limit for spouse contributions
The age limit for people to receive contributions made by their spouse on their behalf increases from 69 to 74 years.
Extended access to bring-forward arrangements
People aged 66 and under will now be able to make three years’ worth of non-concessional contributions to their super in a single year, capped at $100,000 a year.
Small to medium business
Increase in instant asset write-off
The threshold for the instant asset write-off increases to $30,000 from $20,000. It has also been broadened to include businesses with up to $50 million in turnover, making it available to around 3.4 million Australian businesses.
Pensioners and welfare recipients
Energy Assistance Payment
Over 3.9 million eligible Australians will automatically receive a one-off payment of $75 for singles and $125 for couples (combined) to assist with their energy bills. This payment will be exempt from income tax and not counted as income for social security purposes.
Bill Shorten will deliver his budget reply tomorrow night (the 4th of April) and we can expect to head to the polling booths sometime in May.
We will endeavour to keep you up to date with the information that will affect your finances.
Until next time, have a great day.
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Ben Graham-Nellor is an advisor, coach, blogger and speaker who has worked in the financial services industry for over 15 years. He believes that by educating and advising people today, they can improve their tomorrow.
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The information in this communication has been prepared on a general advice basis only. The advice has been prepared without taking account of your specific objectives, financial situation or needs. Accordingly, you should, before acting on the advice, consider the appropriateness of the advice having regard to your objectives, financial situation and needs. In cases where the advice relates to the acquisition, or possible acquisition, of a particular financial product, you should obtain a Product Disclosure Statement (or other relevant information statement) and consider such document before you make any decision about whether or not to acquire the product. For these reasons, it is imperative that you seek advice from your financial adviser before making any investment decisions.
The Federal Budget Analysis prepared by the MLC Technical team, part of GWM Adviser Services Limited.
The information contained in this Federal Budget Analysis is current as at 2 April 2019 and is prepared by MLC Technical, part of GWM Adviser Services Limited ABN 96 002 071749, registered office 150-153 Miller Street North Sydney NSW 2060, a member of the National Australia Bank Group of Companies.
Any advice in this Federal Budget Analysis is of a general nature only. Before acting on any advice, you should consider whether it is appropriate to your objectives, financial situation and needs. Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlement that arise, or could arise, under taxation law. We recommend you consult with a registered tax agent.
Past performance is not a reliable indicator of future performance.
Before acquiring a financial product, you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.