Below are the key proposals, but as always with budget announcements we remember that until legislated they are just words in most cases…
Superannuation largely untouched
A surplus election budget is the news coming out of the 2019-20 Federal Budget. With superannuation left largely untouched, the Government focused on further personal income tax cuts.
However, three key announcements include providing more flexibility for individuals to contribute at ages 65 and 66, the ability to choose their preferred exempt income tax method and increased funding for electronic super rollovers are welcomed.
The key changes proposed for SMSFs and superannuation are:
Greater flexibility for retirement contributions
From July 1 2020, Australians aged 65 and 66 will now be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the Work Test. Previously, this was only available to individuals below 65.
This will align the Work Test with the eligibility age for the Age Pension, which is scheduled to reach 67 from 1 July 2023. There are around 55,000 Australians aged 65 and 66 who will benefit from this reform in 2020-21.
This also includes extending access to the bring-forward arrangements to individuals aged 65 and 66 which allows individuals to make three years’ worth of non-concessional contributions to their super in a single year.
The Government has also increased the age limit for spouse contributions from 69 to 74. Currently, those aged 70 years and over cannot receive contributions made by another person on their behalf.
The Work-Test-Exemption which allows individuals a further year to voluntarily contribute to superannuation after they have finished working will still apply to individuals from 67 to 74.
Personal income tax changes
The Government will lower taxes for individuals by building on its legislated Personal Income Tax Plan announced in the 2018-19 Budget. The changes to the plan will provide immediate relief to low- and middle-income earners. Under the changes, the reduction in tax provided by the low and middle income tax offset will increase from a maximum amount of $530 to $1,080 per annum and the base amount will increase from $200 to $255 per annum for the 2018-19, 2019-20, 2020-21 and 2021-22 income years.
From 1 July 2022, the Government will increase the top threshold of the 19 per cent personal income tax bracket from $41,000, as already legislated, to $45,000.
From 1 July 2024-25, the Government will reduce the 32.5 per cent marginal tax rate to 30 per cent.
In 2024-25, the 37 per cent tax bracket will be abolished under the Government’s already legislated changes.
- A forecasted surplus for 2019-20 of $7.1 billion.
- Expanding the instant asset write-off for small and medium size businesses.
- A $2.8 billion increase in infrastructure spending.
If you have any questions or would like further clarification of the above measures outlined in the 2019-20 Federal Budget, please feel free to call Sterling Planners on 02 8904 9793.