Last night the Federal Government handed down its Budget for 2019-20. With only 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 services and infrastructure.
The key tax announcements have been summarised below.
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 the Low and Middle Income Tax Offset (LMITO) from a maximum of $530 to $1,080 ($2,160 for dual income families). The LMITO is in addition to the Low Income Tax Offset (LITO) and will be received after individuals lodge their tax return for the relevant year.
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.
From 1 July 2024, the 32.5% marginal rate will be reduced to 30%. The 37% tax bracket will also be abolished as per the Governments already legislated plan.
The proposed marginal rates and thresholds are as follows:
Tax rates 2018-22 2022-24 2024 -
Nil Up to $18,200 Up to $18,200 Up to $18,200
19% $18,201 - $37,000 $18,201 - $45,000 $18,201 - $45,000
30% - - $45,001 - $200,000
32.5% $37,001 - $90,000 $45,001 - $120,000 -
37% $90,001 - $180,000 $120,001 - $180,000 -
45% Above $180,000 Above $180,000 Above $200,000
Increasing the Medicare Levy Low-income thresholds
Effective 1 July 2018, the Government will increase the Medicare Levy low-income thresholds for singles, families and seniors and pensioners from the 2019 tax year. The following table compares the level of taxable income below which no Medicare Levy is payable.
Income category 2017-18 2018-19
Individual $21,980 $22,398
Couple/sole parent (family income) $37,089 $37,794
Business tax cuts
Effective from last night (2 April 2019), the Government has proposed to increase and expand access to the instant asset write-off until 30 June 2020. The Government announced two changes in the Budget:
Increasing the instant asset write-off threshold from the proposed $25,000 to $30,000 for small businesses (with aggregated annual turnover of less than $10 million)
Expanding the instant asset write off measure to medium sized businesses with aggregated annual turnover of between $10 million and $50 million.
This means that both small businesses and medium sized businesses 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.
This means that small business (aggregated turnover of less than $10,000,000) have three thresholds for the instant asset write off rule for the 2019 tax year as follows:
Applicable threshold
1 July – 28 January 2019 $20,000
29 January to 1 April 2019 $25,000
2 April to 2020 $30,000
Superannuation
No work test for voluntary contributions extended to age 66
Effective 1 July 2020, the Government will amend the superannuation contributions rules to allow people aged 65 and 66 to make voluntary contributions to superannuation without meeting the work test. This will align the work test with the qualifying age for Age Pension (scheduled to reach 67 from 1 July 2023).
Under current legislation, for an individual tax payer aged 65-74 to be eligible to 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.
Bring forward rule extended to age 66
Effective 1 July 2020, people aged under 67 at any time during a financial year (e.g, 65 and 66 year olds) will be able to trigger the non-concessional bring forward rule. Currently, the bring forward rule can only be used by taxpayers under age 65.
The bring forward rule allows individuals to make up to three years worth of non-concessional contributions (post tax), which are capped at $100,00 a year to their superannuation fund in a single year. Please note there are account balance rules that apply to whether an individual can access the bring forward rules.
Spouse contributions extended to age 74
Effective 1 July 2020, superannuation contributions can be made on behalf of your spouse where your spouse is under age 75. In addition, where the receiving spouse is age 65 or 66 they no longer need to meet a work test. A receiving spouse will need to meet the work test from age 67. Currently, the receiving spouse must be under age 70 at the time of the contribution and must meet the work test if they are between age 65 and 69.
