TAG Tips – Federal Budget, what you need to know

Treasurer, Josh Frydenberg, delivered the Federal Budget on 2 April 2019. We have summarised the Federal Budget essentials for our clients including individuals and small business owners.

Personal Income Tax

Low and Middle Income Tax Offset and Low Income Tax Offset (LMITO)

The Government has announced its intention to increase the maximum amount of the LMITO to $1,080 per year, commencing in the current financial year. Taxpayers earning up to $126,000 a year will receive this tax cut.

The Treasurer said that this means up to $1,080 per year, in their pocket per year for single income households. For families on a dual income, it means up to $2,160.

This will be available for tax returns for the 2018-19, submitted from 1 July 2019.

Personal Income Tax Brackets Changes

Tax threshold and marginal tax rate changes have now been announced.

From 1 July 2022 the upper threshold of the 19% tax bracket will increase from $41,000 to $45,000.

From 1 July 2024, the 32.5% marginal tax rate will reduce to 30%. This will cover all taxpayers earning between $45,000 and $200,000 (resulting in 94% of taxpayers paying no more than 30 cents tax in the dollar).

Medicare Levy Low-Income Thresholds

For the 2018-19 income year, the Medicare levy low-income threshold will increase for singles, families, seniors and pensioners:

  • For singles it will be increased to $22,398 (up from $21,980 for 2017-18).
  • For couples with no children, the family income threshold will be increased to $37,794 (up from $37,089 for 2017-18). The additional amount of threshold for each dependent child or student will be increased to $3,471 (up from $3,406).
  • For single seniors and pensioners eligible for the Seniors & Pensioners Tax Offset (SAPTO), the Medicare levy low-income threshold will be increased to $35,418 (up from $34,758 for 2017-18).
  • The family threshold for seniors and pensioners will be increased to $49,304 (up from $48,385), plus $3,471 for each dependent child or student.


Work Test Requirement

From 1 July 2020, individuals aged 65 and 66 will be able to make voluntary concessional and non-concessional superannuation contributions, without need to meet the “work test”.

Currently, individuals aged 65-74 must work at least 40 hours in any 30-day period in the financial year in which the contributions are made (the “work test”) in order to make voluntary personal contributions

This will give people nearing retirement the opportunity to increase their retirement savings regardless of their working arrangements.


Spouse Contributions Age Limit

From 1 July 2020, the age limit for spouse contributions will increase from 69 to 74 years.

Currently those individuals aged 70 years and over cannot receive contributions made by another person on their behalf.

Streamlining Requirements for the Exempt Current Pension Income (ECPI) Calculation

The Budget includes measures to reduce costs and simplify reporting for superannuation funds by streamlining the administrative requirements for the calculation of the ECPI from 1 July 2020.

Superannuation fund trustees will be allowed to choose their preferred method of calculating ECPI where they have interests in both the accumulation and retirement phases during an income year.

It has been confirmed that superannuation funds will not need to obtain an actuarial certificate when calculating ECPI using the proportionate method, where all members of the fund are fully in the retirement phase for all of the income year.

Tax Relief for Merging Funds

The current tax relief for merging superannuation funds was due to expire on 1 July 2020. This will now be made permanent. This will ensure fund member balances will not be impacted by tax when their funds merge.

The aim of this tax relief is to remove tax as an impediment to mergers, facilitate industry consolidation and improve retirement outcomes for members.

Self Managed Superannuation Funds (SMSF) are excluded from this tax relief.


Expansion of SuperStream Rollover Standard

The Government will provide $19.3 million to the ATO over 3 years from 2020-21, to send electronic requests to superannuation funds for the release of money required under a number of superannuation arrangements.

This change, which will take effect from 31 March 2021, will be implemented by expanding the electronic SuperStream Rollover Standard used for the transfer of information and money between employers, superannuation funds and the ATO.

To coincide with the expansion of the SuperStream Rollover Standard, the start date of Self Managed Superannuation Fund (SMSF) rollovers into Superstream will be delayed until 31 March 2021.

Superannuation Insurance

The Government has confirmed a delayed start date of 1 October 2019 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.

Extension of Bring-Forward Contribution Eligibility

From 1 July 2020, the bring-forward arrangements which currently apply to individuals aged less than 65 years will be extended to those aged 65 and 66.

The bring-forward rules allow individuals meeting the age requirement to make three years worth of non-concessional superannuation contributions, thereby contributing up to $300,000 in a single year, with no further non-concessional contributions for the following two years.”

Business Taxation

Instant Asset Write-off Boosted to $30,000

The Government has announced that the threshold for the instant asset write-off will be increased to $30,000. Access to the write-off will also be expanded to include both small and medium businesses which have an aggregated annual turnover of up to $50 million.

The Government has announced that effective 2 April 2019 at 7.30pm, until 30 June 2020, businesses can instantly write off any asset worth up to $30,000.

It’s worth noting that this is a temporary extension of this incentive.

Consolidation of Division 7A

The Government announced that it will defer the changes to Division 7A, from 1 July 2019 to 1 July 2020.

The Government has delayed the start date by 12 months to “further consult with stakeholders on these issues and to refine the Government’s implementation approach, including to ensure appropriate transitional arrangements so taxpayers are not unfairly prejudiced”.

Expanding Single Touch Payroll

The Government has announced it will support the expansion of data collected through Single Touch Payroll (STP) by the ATO and the use of this data by Commonwealth agencies. The expansion will include information about gross pay amounts and other details. This change aims to reduce the compliance burden for employers and individuals reporting to multiple government agencies.


Disclaimer: The information contained in this document is general in nature only.  Professional advice should be sought before acting on any aspect of this document.  Liability limited by a scheme approved under Professional Standards Legislation.


More Information

For all the Federal Budget’s key initiatives, visit the Federal Government budget website at: https://www.budget.gov.au/