The Federal Budget forecasts a return to surplus of $7.1 billion for 2019-20 financial year.
The Coalition’s pre-election budget is promising $158 million of personal income tax cuts over the next decade, small business tax concessions and large infrastructure spending aimed at easing congestion in cities.
The Budget ensures tax will be a key battleground in the May 2019 Federal election.
Low and Middle Income Tax Offset
The Government is more than doubling the low and middle income tax offset. This is going up from $530 to $1,080 from 2018-19.
Taxpayers with income between $48,000 and $90,000 will be eligible to receive the maximum offset of $1,080. The offset phases out with incomes up to $126,000.
The new amounts will apply for the 2018-19 financial year which means, provided the Government can legislate these changes in the three Parliamentary sitting days in April, the offset will apply to tax returns lodged from 1 July 2019.
The Low and Middle Income Tax Offset is due to end on 30 June 2022.
Lower Taxes for Low and Middle Income Earners
From 1 July 2022, the Government is increasing the top threshold of the 19% personal income tax bracket from $41,000, as currently legislated, to $45,000.
The Government will also increase the Low Income Tax Offset from $645, as currently legislated, to $700 per year.
Taken together, these changes will make up for the removal of the LMITO on 30 June 2022.
Further Structural Changes to The Tax System To Deliver Lower Taxes
With the Government's announced changes, from 2024-25, there would only be 3 personal income tax rates – 19%, 30% and 45%.
From 1 July 2024, the Government will reduce the 32.5% tax rate to 30%, abolish the 37% tax rate and increase the threshold for the 30% tax rate to $200,000.
Therefore, as from 1 July 2024, taxpayers earning between $45,000 and $200,000 will face a marginal tax rate of 30%.
This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates.
Increasing Medicare Levy for Low-income Thresholds
The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from the 2018-19 income year. New thresholds will account for recent movements in the CPI.
The threshold for singles will be increased from $21,980 to $22,398.
The family threshold will be increased from $37,089 to $37,794.
For single seniors and pensioners eligible for SAPTO, the threshold will be increased from $34,758 to $35,418.
The family threshold for seniors and pensioners will be increased from $48,385 to $49,304.
For each dependent child or student, the family income thresholds increase by a further $3,471, instead of the previous amount of $3,406.
New Personal Tax Rates and Thresholds
Increase top threshold of the 19% tax bracket from $37,000 to $45,000
Increase top threshold of the 32.5% tax bracket from $90,000 to $120,000
Simpler Tax Rates as from 1 July 2024
Reduce tax rate from 32.5% to 30%
Increase top threshold of the 30% tax bracket from $120,000 to $200,000
Removal of the 37% tax bracket
Instant Asset Tax Write-off
Small business entities (i.e. those with aggregated annual turnover of less than $10 million) will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from 2 April 2019 to 30 June 2020.
They will continue to have access to the simplified depreciation rules.
Medium sized businesses
Businesses with aggregated annual turnover between $10 million and $50 million will also be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use from 2 April 2019 to 30 June 2020.
The purchase date is critical. The concession will only apply to assets purchased after 2 April 2019 by medium sized business (as they have previously not had access to the instant asset write-off) up to 30 June 2020.
Tax Integrity — Increasing Engagement And On-time Payment Of Tax And Superannuation Liabilities
The Government will provide $42.1 million over four years to the ATO to increase activities to recover unpaid tax and superannuation liabilities.
These activities will focus on larger businesses and high wealth individuals to ensure on-time payment of their tax and superannuation liabilities.
The measure will not extend to small businesses.
Improving Flexibility For Older Australians To Contribute To Super
The Government will allow voluntary superannuation contributions (both concessional (deductible) and non-concessional) to be made by those aged 65 and 66 without meeting the work test from 1 July 2020. Aligning the work test with the eligibility age for the Age Pension which is scheduled to reach age 67 from 1 July 2023.
People aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring forward rule, currently limited to $100,000 per annum ($300,000 under the bring-forward rule)..
The Government also announced that people up to and including age 74 will be able to receive spouse contributions, currently those aged 70 and over cannot receive spouse contributions. Spouse contributions are contributions to your spouse’s super, which may entitle you to a tax offset if your spouse meets the requirements.
Protecting Your Super Package — Putting Members’ Interests First
The Government will delay the start date for ensuring insurance within superannuation is only offered on an opt-in basis for accounts with balances of less than $6,000 and new accounts belonging to members under the age of 25 years to 1 October 2019.
These changes (currently before Parliament) will protect the retirement savings of young people and those with low balances by ensuring their superannuation is not unnecessarily eroded by premiums on insurance policies they do not need or are not aware of.
The changes will also reduce the incidence of duplicated cover so that individuals are not paying for multiple insurance policies, which they may not be able to claim on. These changes will not prevent anyone who wants insurance from being able to obtain it — low balance and young members will still be able to opt-in to insurance cover within superannuation.
Energy Assistance Payment
The Government will provide a one-off payment of $75 for singles and $62.50 for each member of an eligible couple ($125/couple) who receive a qualifying payment on 2 April 2019 to provide relief from high energy costs. Qualifying payments include the Age Pension, Carer Payment, Disability Support Pension, Parenting Payment Single, and Veterans’ pensions and payments.
Additional Residential care places and Home Care Packages/Supplements
The Government proposes the following:
13,500 additional residential care places
10,000 home care packages across the four package levels over 5 years from 2018-19
Increase to the dementia and veterans’ home care supplements
The Government has announced a National Plan to Respond to the Abuse of Older Australians. The Plan includes $18 million to create a new National Hotline (1800 ELDERHelp or 1800 353 374) and conduct trials of frontline services for victims of abuse. The Government is also contributing $1.5 million towards developing a Serious Incident Response Scheme.
The Government is establishing the independent Aged Care Quality and Safety Commission from 1 January 2019.