2019/20 Federal Budget Highlights

With a bit over a month to go until the Federal Election, it’s unsurprising that the announcements centred on election-friendly promises such as tax cuts and increased funding to healthcare, aged care services and infrastructure.
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The key take-outs to be aware of include:
  • • immediate tax cuts for low-to-middle income earners to help ease the cost of living, and lowering the 32.5% tax rate to 30% from 1 July 2024
    • the ability for people aged 65 – 66 to contribute to super without meeting the work test requirements from 1 July 2020
    • an increase to the age limit for spouse contributions, from 69 to 74 from 1 July 2020
    • a significant increase to funding for health and aged care services.

Finally, it’s important to remember that the Budget announcements are still only proposals at this stage. Each of the proposals must be passed by Parliament before they’re legislated.
The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. Highlights of relevance to our clients include:

1. Personal Income Tax Cuts

The Government has announced it will extend the personal income tax cuts that were announced in last year’s Federal Budget. This is proposed to be achieved as follows:

From 1 July 2018 to 30 June 2022

increase of the Low and Middle Income Tax Offset (LMITO) from a maximum of $530 to $1,080 ($2,160 for dual income families) and this can be claimed in your 2018/2019 tax return.

From 1 July 2022
    • • the upper threshold for the 19% tax bracket will increase from $41,000 to $45,000, and
      • the LITO maximum amount will increase from $645 to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000.
      • LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
From 1 July 2024

the 32.5% marginal tax rate will be reduced to 30%. The 37% tax bracket will also be abolished as per the Government’s already legislated plan.

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2. Increasing the Medicare Levy thresholds (Effective 01.07.2018)

This will be increased slightly, resulting in less Medicare Levy payable

3. Small & Medium Business – Increased access to the instant asset write-off (Effective 02.04.19 – 30.06.2020)

This means businesses with a turnover of less than $5 million (small and medium) can immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from Budget night to 30 June 2020.
The $30,000 threshold applies on a per asset basis. This means eligible businesses can instantly write off multiple assets.

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4. Superannuation

No work test for voluntary contributions extended to age 66 (Effective 01.07.2020)
The Government will amend superannuation contribution rules to allow people aged 65 and 66 to make voluntary contributions to superannuation without meeting the work test.
Under current legislation, for a client aged 65-74 to be eligible to a make a voluntary
superannuation contribution they must have already satisfied the work test during the financial year the contribution is made.

The work test is satisfied where a client has been gainfully employed for 40 hours in a period of 30 consecutive days during the financial year. Alternatively, from 1 July 2019 clients may instead satisfy the work test exemption to make voluntary contributions.

 Bring-forward rule extended to age 66 (Effective 01.07.2020)
People age under 67 at any time during a financial year will be able to trigger the non-concessional bring-forward rule. Currently, clients must be under age 65 at any time during a financial year to trigger the bring-forward rule. The bring forward rule allows client to make up to three years’ worth of non-concessional contributions, which are capped at $100,000 a year, to their superannuation fund in a single year.

5. Social Security

Energy Assistance Payment (Effective 30.06.2019)
Social security recipients will receive a once-off Energy Assistance Payment by the end of the current financial year. The payment will be $75 for singles and $125 for couples combined and will be exempt from income tax.

6. Aged Care

Increased funding for aged care
The Government will provide $724.8 million over five years from 2018-19 to fund improvements in residential and home care services.

Extension of Commonwealth Home Support Programme
The Government will provide $5.9 billion to extend the Commonwealth Home Support Programme (CHSP) funding arrangements.

The CHSP contributes to essential home support services, such as meals (Meals on Wheels), personal care, nursing, domestic assistance, home maintenance, and community transport, to assist older people to keep living independently in their own home.

Comprehensive analytics and research

We invest a great deal of time and effort researching the best tax effective investment strategies for our clients. We have developed a number of systems to manage and track the marketplace.
The investment landscape always evolves and it is more important than ever to consider your investments and superannuation funds carefully. We pride ourselves on being experts in researching opportunities, investments and strategies that fit in with your retirement goals. We want, our clients to get on with enjoying their life rather than worrying about money.
For an obligation free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au

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