2019 Federal Budget Snapshot

Treasurer Josh Frydenberg’s maiden budget has received plenty of attention for its promise to put Australia ‘back in the black’.

While most budget analyses focus on high-level changes, deciphering what the budget means for individuals can be challenging.

Broadly, the 2019 Federal Budget focuses on addressing bracket creep by reducing the tax burden for the majority of working Australians, offering greater superannuation flexibility for retirees and providing a one-off energy relief payment for eligible social security recipients.

We’ve broken down these points in more detail below. If you’d like advice about how these changes could impact you, please get in touch with one of our friendly advisors on 1800 444 396.

Note: These changes are proposals only and are subject to legislation and regulations.

Reducing the tax burden

Immediate tax relief

Low and middle-income earners will receive a lump sum payment of up to $1,080 per person thanks to the proposed low and middle-income tax offset (LIMTO). This amount will benefit taxpayers earning between $48,000 and $90,000 per year. Lesser amounts will also be provided to those earning $90,000 to $126,000 per year. You will be able to claim this in your 2018/2019 tax return and in the following three financial years.

Sourced from 2019 Federal Budget papers.

Future tax relief

From 1 July 2022, it’s proposed that the 19 percent 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 percent marginal tax rate is proposed to drop to 30 percent for incomes between $45,000 and $200,000. The current Federal Government estimates that from 1 July 2024, 94 percent of taxpayers will have a marginal tax rate of no more than 30 percent.

Offering greater superannuation flexibility

Changes to voluntary super contributions

Currently, people aged 65 to 74 can only make voluntary super contributions in the following circumstances:

• if they are in paid employment, and;
• if they meet a ‘work test’. This means they must have worked a minimum of 40 hours over a 30-day period during that financial year.

The new budget proposes that from 1 July 2020, Australians aged 65 and 66 will be able to make voluntary super contributions without meeting the work test. This change will bring rules around the work test into line with plans to increase the age pension eligibility age from 65 to 67 years old from 1 July 2023.

Extending access to bring-forward arrangements

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, capped at $300,000.  Non-concessional contributions are voluntary contributions made from your after-tax income.

Under the proposed budget changes, the age in which Australians can take advantage of this arrangement will increase to 66, allowing anyone 66 and under to make three years’ worth of non-concessional contributions to their superannuation in a single year, subject to the same cap.

Increasing age limit for spouse contributions

For people who are earning up to $40,000 per year, their partners can make a spouse contribution to their superannuation. This assists low-income earners with increasing the size of their super, in a shorter time frame.

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 is set to increase from 69 years old to 74 years.

Providing an energy relief payment

Energy Assistance Payment

Over 3.9 million eligible Australians will 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. This payment will primarily be provided to those that currently receive welfare payments or pensions.

Looking for more information about how budget changes could affect your superannuation? Call us on 1800 444 396 to chat with our team.