If you sat down at 7:30 last night to watch the 2018 Federal Budget Announcement, you may have found yourself a little overwhelmed. With so many figures and areas of taxation to get your head around, we have sat down, dissected and summarized the answers to the question you may be asking – “What's in it for me (and my family)?”
Personal income tax
The Treasurer announced plans for a three-step, seven-year plan:
- Step One: Effective immediate, low and middle income earners are to benefit from tax savings of up to $ 530 per person (or $ 1,060 per couple).
- Step Two: From 1 July this year, the threshold of the 32.5% tax bracket will increase from $ 87,000 to $ 90,000, then will again increase in July 2022 from $ 90,000 to $ 120,000.
- Step Three: From 2024-25, there will be just two income tax brackets for people approaching over $ 41,000 per year: 32.5% for incomes between $ 41,001 and $ 200,000, and 45% for incomes exceeding $ 200,000.
- The Medicare levy will remain at 2%.
Have you ever considered changing your super fund, but found it cost-prohibitive because of high exit fees? Great news in these years budget – super funds will soon be banned from charging exit fees. But you'll need to wait until 1 July 2019 to make your move.
Other changes to superannuation include:
The balance-eroding practice of automatically adding life insurance to a superannuation policy, no matter what the age of the person, will end. (To date, super members under the age of 25 pay nearly $ 200 million a year in life insurance fees through superannuation). Those under 25 are now required to 'opt in' to buying life insurance.
Companies can no longer automatically deduct life insurance cover for all funds where no contributions have been made for 13 months.
According to the Association of Superannuation Funds of Australia, more than 60% of Australians have multiple super funds. So, the ATO will turn their eye to inactive super accounts and merge them with their owners' active funds.
- Self-managed super funds (SMSFs) can now have 6 members, up from 4.
- SMSFs with a history of good record keeping will be rewarded by reducing annual audits to 3 yearly audits.
- People over 65 can put up to $ 300,000 into super from the proceeds of selling their home.
- First home buyers who have made super contributions under the First Home Super Saver Scheme can access their money for eligible property purchases.
Young people living in rural and remote communities will find it easier to get access to Youth Allowance payments while they are studying away from home (eligibility for these payments is based on parental income).
The Federal Government will match funding with the states and territories to provide traineeships and apprenticeships for “high-demand” areas over four years. However, there is one caveat: each of the states and territories needed to sign up for this to go ahead.
There are a number of changes in this years budget to benefit older Australians. They include:
- $ 1.6 billion over four years has been set so so 14,000 seniors can stay in their homes rather than go into a nursing home.
- $ 20 million for mental health nurses to support older people still living at home (the Government notes that men over 85 have the highest risk of suicide of all age groups).
- $ 40 million has been budgeted for urgent building and maintenance work for agreed care facilities in regional and remote areas.
- $ 33 million has been set aside to address a chronic shortage of palliative care in nursing homes.
- A one-year exemption from the 'work test' will apply to recent retirees who have less than $ 300,000 in total super savings.
- The Pension Loans Scheme will be available to all Australians over Age Pension age and the maximum payments will increase to 150% of the full Age Pension.
- Pension Work Bonus increases to $ 7,800 pa from $ 6,000.
- Finally, the Government has committed to make the agreed-care system easier for families to navigate, simplifying forms and providing relevant online educational facilities.
Access to more affordable medicine: Granted, you will need to wait years for this, but it's good to know the government will spend $ 302 million over four years to improve your access to generic and less expensive medicine.
There are plans to allocate $ 130 billion for public hospitals over five years. The government also proposed a crack down on unnecessary diagnostic tests.
Access to your own data. The government announced the establishment of a “consumer data right”. This will allow you to take control of your online personal data and safely share it with reliable service providers, starting with the banking, energy and telecommunications sectors.
No budget would be complete without something for small businesses. If you run your own business, the current deduction on spending on eligible assets of up to $ 20,000 has been extended to July 2019. Another win: streamlining of GST reporting which, in turn, will save money – a welcome change for around 2.7 million small businesses.
Craft Beer Brewers. There are around 350 craft brewers in Australia, so chances are you are not one of them. However, most consider the tax changes that put small craft beer brewers at a disadvantage to be a victory for common sense. Beer sold in kegs larger than 48 liters have been taxed at a lower rate than smaller kegs, which in effect has favored large producers. The change brings the lower tax level down to beer sold in kegs larger than the 8-liter size.
While not all of these changes are likely to affect you personally, you might give them your 'tick' of approval:
- Multinational companies now to be policed and stopped from shifting profits to lower-taxing countries (they do this by loading up local operations with debt).
- Online hotel booking websites based outside of Australia will now be taxed at the same rate as Australian businesses, ending the inequality that currently occurs between international and local booking providers.
- Companies that are currently 'pushing the boundaries' and taking advantage of the research and development tax incentive scheme will be stopped. This will ensure funding goes to genuinely innovative spending.
- A $ 1.3 billion plan to support Australia as a 'global leader' in medical technology, biotechnology and pharmaceuticals.
- The ATO will turn an eye to the 'Black Market Economy', with more audits, 'mobile strike teams' and a 'Black Economy Hotline' for the public to report suspicious activity of businesses trying to avoid paying tax.
If you have any questions, your mortgage broker is always ready to help.