The 2018/19 Federal Budget has landed

09 May, 2018

In case you missed it, the 2018/19 Federal Budget was handed down last night. You might think it's a snooze-fest but the budget affects everyone! Here is a great recap from IOOF: 

There is no doubt this is an ‘election budget’. The Treasurer has taken just under half of the $35 billion of improved revenue and turned it into tax cuts targeted to benefit all Australians.

On the expenditure side, the Government has rolled out the bucks for aged care, and rightfully so. However, 14,000 new aged care places is way short of the 100,000 places currently needed.

All Australians of Age Pension age will have access to the improved Pension Loan Scheme. The Pension Work Bonus will be increased and extended to the self-employed.

Tax Cuts

The first round of personal income tax cuts will start on 1 July 2018 and include:

  • a temporary tax offset for low and middle income earners of $200 pa (for individuals earning up to$37,000 pa) increasing to $530 pa (for those earning from $48,000 to $90,000 pa) then phasing out from $90,000 to $125,333 pa.
  • raising the 32.5% tax threshold to $90,000.  

These temporary tax concessions will end 30 June, 2022.

We will have to wait until 1 July, 2022, before we get the second round of tax cuts:

  • An increase to the low income tax offset from $445 pa to $645 pa.
  • A further increase to the 32.5% tax threshold to $120,000.  

Finally, from 1 July 2024, the 37% marginal tax rate will be abolished and the 32.5% tax threshold will be increased to $200,000.

Superannuation

Superannuation got some attention with a series of integrity reforms, changes to self-managed super funds(SMSFs) and small APRA funds (SAFs)

From 1 July 2018, SMSFs and SAFs can increase to six members and SMSFs with good track-records can move from  annual to three-year audits.

From 1 July 2019:

  • Members over age 65 will not have to meet the work test to make contributions to super in the first year after they stop working. This is so long as their super savings are less than $300,000.
  • Exit fees will be abolished on all super accounts.
  • For super accounts under $6,000, administration and investment fees will be limited to 3%, measure half-yearly, and capped at $90 per six months.
  •  Inactive accounts under $6,000 will be transferred to the Australian Taxation Office (ATO) to be consolidated with the member’s active account
  • Opt-out insurance will be banned for those under 25 or if there is less than $6,000 in the super account
  • The ATO will undertake a review of the section 290-170 Notice system to ensure that members put in their notice before getting a tax deduction for personal contributions.  

All-in-all there are big ticket tax cuts and a lot of little reforms hidden in the woodwork. It isn’t a glamourous budget and there’s likely to be plenty more left in the tank for an election later this year. 

Read the full budget analysis by IOOF here: