As we near the end of the tax year, if you have a Self-Managed Super Fund in pension mode make sure you have drawn your minimum pension payments.
Failure to draw your minimum pension results in your pension losing its tax free status and the earnings being taxed at 15%.
Tax Deductible Super Contributions
Claiming a deduction for personal contributions to superannuation can be a tax effective way of saving for retirement. These are known as ‘personal concessional contributions’. Personal concessional contributions are made by a person contributing funds to their superannuation, advising their superannuation fund that they intend to claim a tax deduction, then claiming the deduction when they submit their tax return.
If you are employed, generally the more common method of making before tax contributions to superannuation has been to enter into a salary sacrifice arrangement with your employer. However, since 1 July 2017, making personal concessional contributions is another allowable option.
Contributions into superannuation, when a tax deduction is claimed, are generally taxed at 15%. This may be lower than the marginal tax rate which applies to taxable income, including income earned from being self-employed or employed. For the 2018/19 financial year, this potential tax saving applies so long as your total concessional contributions are not more than $25,000.
Prior to making a personal concessional contribution to superannuation, you should ensure that:
You are eligible to make a voluntary contribution to superannuation. Broadly, those aged 18-65 are eligible, and those aged 65-75 are eligible if they meet a work test.
Within an allowed timeframe, you advise your superannuation fund of your intention to claim a tax deduction, and your tax return reflects this election.
If you are an employee, you allow for the fact that your total concessional contributions include any compulsory superannuation guarantee and salary sacrifice contributions.
Also consider:
Individuals won’t be able to access amounts they contribute to superannuation until they meet a condition of release. Generally, this occurs upon the earlier of either reaching age 65, or fully retiring after reaching preservation age (currently age 57, however a staggered increase to age 60 will occur over time).
If your total income is more than $250,000 a year you may also be subject to an additional tax of 15% (known as Division 293 tax) taking the total up to 30%.
The impact a personal concessional contribution will have on your cash flow, and whether you can afford this reduction.
Personal super contributions-deduction notices
The 10 per cent test used to determine eligibility to make personal deductible contributions was removed with effect from 1 July 2017. Individuals are generally able to claim a tax deduction for personal contributions made in 2018/19, subject to other eligibility conditions being met.
Anyone intending to claim a deduction for personal super contributions must lodge a deduction notice, using the approved form, with their fund before the earlier of:
the day they lodge their tax return for the year in which the contribution was made; or
the end of the financial year after the financial year in which the contribution was made.
This information is general information only. It does not constitute any recommendation or financial product advice. It provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. The information has been prepared without taking into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. Any tax position described in this publication is a general statement and is for guidance only
The 2019-20 State Budget was delivered on Monday 27 May 2019. Below are some of the key announcements made. These measures have to be approved by the Victorian Parliament before they can commence, which is likely to be in June 2019.
The payroll tax-free threshold will be increased over the coming years, from $650,000 to $700,000 by 2022-23
Passenger vehicles worth between $100,000 and $150,000 will be charged a duty of $14 per $200 of value and vehicles valued above $150,000 will be charged a duty of $18 for each $200 of value
The tax paid by foreign property investors will increase from 7% to 8% from 1 July 2019
The tax paid by absentee landowners will be increased from 1.5% to 2% from the 2020 land tax year
Adjoining blocks of land from the main residence on a separate title and without a residence will no longer be eligible for the principal place of residence land tax exemption. This will apply from the 2020 land tax year
Corporate reconstruction exemption to be expanded and the exemption replaced with a concessional rate. From 1 July 2019, the value of this concession will be reduced and a duty rate of 10% of the duty otherwise payable will be applied
From 1 July 2019, a land transfer duty concession will be provided to commercial and industrial property transactions in regional Victoria. A 10% concession will be provided from 1 July 2019 scaling to 50% by 1 July 2023.
The Victorian State Revenue Office (SRO) is issuing land tax assessments for the 2019 calendar year. The land tax assessment for 2019 uses the value of your land at 1 January 2018 to calculate the tax.
It has been reported that assessments are generally listing property values at significantly higher levels than 2018 so you may receive a land tax assessment for the first time because your land's site value has increased past the $250,000 land tax threshold (for trusts, it's $25,000).
If you own land, excluding exempt land such as your home (principal place of residence), as at midnight on 31 December 2018 and the total taxable value of this land is equal to or above the $250,000 threshold you are required to pay land tax and should receive a land tax assessment. Contact the SRO as soon as possible on 13 21 61 to ensure they have a correct record the land(s) you own. Failing to notify within the required time limit of one month is a notification default under the Taxation Administration Act 1997 and you may be liable for penalty tax.
Land owners are encouraged to carefully review their 2019 Land Tax Assessment notices to confirm all the details are correct.
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
Changes include:
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
Changes include:
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 businesses
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
Elder Abuse
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.
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