2019-20 Federal Budget Summary

The 2019-20 Budget has been delivered in April 2019, a month earlier than usual, and can be seen as an unofficial start of the Coalition’s election campaign. Among the announcements are some highly anticipated tax cuts, changes to voluntary superannuation contribution rules and a promise to return to surplus.

Tax payers money spent graph illustration

Overview

The foundation of the 2019-20 Budget is the Treasurer’s announcement that the budget will return to surplus in 2019-20, with a projected surplus of $7.1 billion (0.4 per cent of a total federal budget of around $500 billion). The surplus benefits from a substantial increase in revenue from company tax, based on strong commodity prices, which has more than offset a softer outlook for household consumption, dwelling investment and average wages.

As widely anticipated, the Treasurer has announced an accelerated program of tax cuts, building on the low and middle income tax relief announced in the 2018-19 Budget. An increase to the Low and Middle Income Tax Offset will be available for most taxpayers for 2018-19, provided the Government can secure passage of the required legislation through the Parliament. Proposed major reform of income tax rates and thresholds would see most Australians facing a marginal tax rate of 30 per cent from 1 July 2024. The Government has also announced an extension of its infrastructure investment program, with major projects including high speed rail between Geelong and Melbourne and additional funding for urban congestion and strategic road projects. The budget contains few new savings measures, with the vast majority of new savings coming from a more efficient administration of income support payments using Single Touch Payroll data.

Some other major announcements in the 2019-20 Budget include:

2019-2020 Budget Illustration

Remember: these are only proposals at this stage, and will only become law if passed by Parliament. Additionally, if there is a change of Government at the Federal Election, these proposals may be changed or removed from the next and subsequent Budgets.

Tax Changes

The Government will lower taxes for individuals by building on its Personal Income Tax Plan, which was announced in the 2018-19 Budget.

Lower taxes for low and middle income earners

The Low and Middle Income Tax Offset (LMITO) was introduced in last year’s Budget as an addition to the Low Income Tax Offset (LITO). The LMITO will increase for individuals and families, starting from the current financial year, with eligible low-to-middle income earners receiving payment after submitting their tax return.

The base rate for the LMITO will increase from $200 to $255 and the maximum payment will increase from $530 to $1,080.

From 1 July 2022, both offsets will be replaced by a single low-income tax offset.

What could this mean for you? If you are eligible to receive the Low and Middle Income Tax Offset, you can expect to receive a payment amount after you submit your next tax return.

Extension to personal income tax cuts

Over the next five years, many Australians will receive a decrease to their income tax rate in one of three ways:

  • The upper threshold for the 19% marginal tax rate will increase from $37,000 to $45,000.
  • The 32.5% marginal tax rate will reduce to 30%.
  • The 37% marginal tax rate will be abolished (this change has already been legislated).

These changes will be progressively rolled out between now and 1 July 2024, as shown in the table below.

Tax rates To 30 June 2022 1 July 2022 to 30 June 2024 1 July 2024 onwards
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
32.5% (30% from 1 July 2024) $37,001-$90,000 $45,001-$120,000 $45,001-$200,000
37% $90,001-$180,000 $120,001-$180,000 N/A

What could this mean for you? These measures are intended to ease the cost of living by reducing the income tax rate for many Australians, to varying degrees. The Government estimates that 94% of tax-paying Australians will pay 30% tax or less from 1 July 2024.


Taxable income illustration

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.

What could this mean for you? You wont be charged the Medicare Levy if your taxable income is below the following thresholds:

Tax rates 2017-18 2018-19
Taxpayers entitled to senior and pensioners tax offset
Individual $34,758 $35,418
Married or sole parent $48,385 $49,304
For each dependent child or student, add: $3,406 $3,471
All other taxpayers
Individual $21,980 $22,398
Couple/sole parent (family income) $37,089 $37,794

For more information about the proposed tax changes, speak to your accountant or financial adviser.

Superannuation

No work test for voluntary contributions by people aged up to 66

The Government will update the superannuation contribution rules to allow people aged 65 and 66 to make voluntary contributions to superannuation without meeting the work test. Voluntary contributions include after-tax (non-concessional) contributions, tax-deductible (concessional) contributions, voluntary employer contributions and spouse contributions.

What could this mean for you? Currently, for you to make a spouse contribution, your spouse must be under age 70 at the time of the contribution, and must meet the work test if they are aged between 65 and 69. This change enables you to make spouse contributions for a further five years, giving you more opportunities to equalise your superannuation balances while potentially claiming a tax offset.

Bring-forward rule extended to people up to 66

The Government will update the superannuation contribution rules to allow people aged under 67 to make three years’ worth of after-tax (non-concessional) contributions in a single year. Under current contribution caps, that would enable under-67-year-olds to contribute up to $300,000 in one year.

What could this mean for you? Currently, you must be under 65 during a financial year to use the bring-forward rule. This change enables 66 and 67 year olds to boost their super in preparation for retirement, provided they meet other eligibility criteria. In particular, you can only make non-concessional contributions if your total super balance on 30 June, before the financial year when you make the contribution, is under $1.6 million.

Spouse contributions extended to people aged up to 74

Under the proposed changes, individuals will be able to contribute to their spouse’s superannuation where the receiving spouse is under age 75. In addition, if the receiving spouse is aged 65 or 66, they will no longer need to meet a work test. The work test will continue to apply if the receiving spouse is aged 67 or over.

What could this mean for you? Currently, for you to make a spouse contribution, your spouse must be under age 70 at the time of the contribution, and must meet the work test if they are aged between 65 and 69. This change enables you to make spouse contributions for a further five years, giving you more opportunities to equalise your superannuation balances while potentially claiming a tax offset.

For more information about the proposed superannuation changes, speak to your financial adviser.

Social Security, Health and Aged Care

One-off energy assistance payment for social security pension recipients

Social security pension recipients will receive a one-off Energy Assistance Payment to help with increased power bills. The payment will be $75 for singles and $125 for couples, and will be exempt from income tax.

What could this mean for you? If you receive an Age Pension, Disability Support Pension, Carer Payment, Parenting Payment Single, or certain payments from the Department of Veterans Affairs, such as the Service Pension or War Widow(er)s Pension, you could be eligible for a one-off payment by the end of the 2020 financial year.

Increased access to diagnostic imaging and higher Medicare rebates

The Government will provide $309 million to improve access to diagnostic imaging, with $199 million provided to increase patient rebates for items on the Medicare Benefits Schedule (MBS) from 1 July 2020. Additionally, the Government has allocated $187 million to increasing patient rebates for 119 General Practitioner service items.

What could this mean for you? For patients, these measures could help to make medical services more accessible and affordable, with fewer out-of-pocket costs. For medical practitioners and imaging providers, they provide an end to the rebate freeze originally introduced in 2013 and extended in 2016.

Funding for 10,000 extra home care packages and 13,500 residential care places

The Government will provide $724.8 million over five years from 2018-19 to fund improvements in residential and home care services, including a one-off increase to the basic subsidy for residential aged care recipients, 13,500 additional residential aged care places, and 10,000 additional home care packages.

What could this mean for you? These measures continue efforts in recent Budgets to reduce waiting times for both home care packages and residential care places, as well as subsidising the cost of providing residential care. As at 31 December 2018, around 74,000 Australians were in the queue for a home care package, down from more than 100,000 a year before. If you or a family member are in this situation, these measures could help provide more choice and enable you to access services sooner.

Extension of commonwealth home support program

The Government will provide $5.9 billion to extend funding for the Commonwealth Home Support Program (CHSP) until 30 June 2022. Funding is currently due to cease on 30 June 2020.

What could this mean for you? The CHSP contributes to essential home support services, including Meals on Wheels, personal care, nursing, domestic help, home maintenance, and community transport. If you or a family member rely on these services to continue living independently, this funding extension will provide further support over the next few years.

For more information about the proposed changes, speak to your financial adviser.

Other Changes

Investing in essentials services Australians rely on

Business

  • A new $3.9 billion Emergency Response Fund to help agribusinesses recover from natural disasters.

Education and skills

  • $525.3 million to help modernise the vocational training sector, including funding up to 80,000 new apprenticeships.
  • $93.7 million over four years for scholarships to study in regional Australia.
  • $10 million over four years to help educate Australian children, parents and teachers on cyber-safety.
  • Abolition of the $3.9 billion Education Investment Fund to finance the new Emergency Response Fund.

Health

  • A planned $5 billion investment over 10 years in the Medical Research Future Fund, including $614 million for rare cancers and diseases, $220 million for cardiovascular health, $605 million for clinical infrastructure and $150 million for stem cell research.
  • $737 million for mental health over seven years, including $461 million for youth mental health services.

The environment

  • An additional $2 billion for the Government’s Climate Solutions Fund.

For more information about the proposed changes, please book an appointment to speak with us. To read and explore the full Federal Budget 2019-20, head to www.budget.gov.au. 

Fortress Financial Solutions is an award-winning financial planning practice based in Toowoomba. We specialise in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

disclaimer PNGCorporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this you should consider whether the information is appropriate in light of your objectives, financial situation and needs.

This Budget Summary was prepared by Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State). Colonial First State is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A PDS for Colonial First State’s products are available at colonialfirststate.com.au or by calling 13 13 36.

 

Are you ready to take control of your financial future

Toowoomba Financial Planners
50 Most Influentional Advisers
  • F: (07) 4641 7497
  • This email address is being protected from spambots. You need JavaScript enabled to view it.
  • 15 Isabel Street,
    Toowoomba QLD 4350
  • ABN: 32 164 822 333
The information and any advice on this website does not take 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. When considering whether to acquire a financial product, before making any decision, you should obtain the relevant product disclosure statement.

Any outlooks or projections on this website rely on assumptions as stated, however actual results may differ materially from these projections. Past performance is not a reliable indicator of future performance. This website may contain material provided by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. To the maximum extent permitted by law: no guarantee, representation or warranty is given that the information or advice in this website is complete, accurate, up-to-date or fit for any purpose.

Copyright © 2019 Gallagher Benefit Services Pty Ltd ABN 49 611 343 803 | AFSL No. 488001, All rights reserved.
Yoonet
© Copyright 2018