Tax relief worth $140 billion. An end to bracket creep. Helping regional kids head away to university and keeping older Australians in their home: these were some of the key themes emerging from this week’s Federal Budget release.
But what exactly do these initiatives mean for you ? While the Federal Budget – and all its details – are typically a slow-reveal, a snapshot of information we’ve gleaned so far includes:
Tax Relief… it’s on it’s way for 10 million Australians… in the second half of 2019
If your earnings next financial year (between 1 July 2018 and 30 June 2019) are less than $37,000, you’ll be in line for a $200 low and middle-income tax offset once you lodge your return after 30 June 2019.
If your earnings are between $37,000 and $90,000 a year, that offset will grow to as much as $530.
It’s worth noting, however, this will be an offset on your tax return – it won’t be cash-in-hand, so to speak. And it won’t apply until after the end of the 2018/2019 Financial Year… so even though this announcement has been one of the most talked-about aspects of the Federal budget, don’t go spending that cash just yet!
Bracket creep, be gone – one of the few times you’ll be happy to go backwards
Changes to tax brackets mean that as of 1 July 2019, anyone who earns between $87,000 and $90,000 will drop back into the lower tax bracket, paying 32.5% tax for every dollar they earn, rather than 37%.
In four years’ time, the upper threshold of the lower tax bracket (19%) will grow from $37,000 to $41,000.
That will create just three tax brackets (not including the tax-free bracket on annual earnings up to $18,2000), which the Government has claimed will mean that, in six years’ time, 94% of Australians will be paying 32.5 cents in tax out of every dollar they earn.
Superannuation changes – small, but significant…
Do you have a Superannuation Account? If it has a balance below $6000, fees to manage it are going to be capped at 3% from 1 July 2019.
Super accounts with balances below $6000 will also now come under the wing of the Australian Tax Office, which will take it upon themselves to reunite these inactive accounts with their rightful owners.
Exit fees on superannuation consolidations will also come to an end.
Last of all, from 1 July 2019, a work text exemption will apply for voluntary contributions to superannuation for anyone aged between 65 and 74 years if their super balance is below $300,000.
Small business keeps the instant asset write-off for another year
The Government’s $20,000 instant asset write-off for small businesses will remain.
Introduced as part of the 2015/2016 budget, the initiative will now continue until 30 June 2019.
Youth Allowance will be easier for rural and regional students to access
Regional youth hoping to study at university in 2019 will have a better chance at accessing Youth Allowance.
The Government will change how it assesses their parents’ income in the 12 months before they head away to study, putting the parental income threshold at $160,000.
Additionally, the parental income will be calculated in the financial year before the young person heads to university. Note this will continue to apply only to those studying while living away from their parents, rather than those students who attend tertiary study while living at home.
Pensioners can earn more, borrow more
The Pension Work Bonus will be extended, allowing pensioners to earn an additional $25 a week without needing to worry about it impacting their fortnightly pension payments.
The Pension Loan Scheme will also undergo a change; it will grow so that home equity can be used to increase retirement income by just over $17,500 each year for those on a full rate pension. This means anyone over the pension age will be able to mortgage their home to the Government, in return for receiving fortnightly pension payments.
Retirees have a better chance to stay at home
Significant funding will create 14,000 additional high-level home care packages over the next four years, aimed at helping retirees to stay in their own home, rather than enter aged care facilities.
Have a specific question about how the 2018/2019 Federal Budget will impact you?
Speak to a member of the Sinclair Wilson team for an expert assessment of your personal circumstances.
