2018 Federal Budget Release – Key points for YOU!
Personal Income Tax
Farmers & Regional/Rural Aussies
Personal Income Tax Changes
If you earn up to $37 000
Those earning up to $37,000 a year will have their tax bill reduced by a maximum of $200, which amounts to $3.85 a week.
However, the tax cut will not be seen in your weekly pay packet. It will be delivered in a lump sum via a tax offset in your annual tax return from July 1.
If you earn $37 000 to $48 000
Australians who earn more than $37,000 a year can expect a maximum of $530 per year back in their pockets via the same annual tax offset.
If you look at it as a lump sum for a couple, it’s enough to cover your car rego or pay your family’s quarterly power bill. If you look at it as a weekly pay bump, it amounts to $10.20, about the cost of a fancy burger or a coffee twice a week.
The government plans to extend the tax breaks in 2022-23 by lifting the 19c tax threshold from $37,000 to $41,000.
If you earn $48 000 to $90 000
About 4.4 million Australian taxpayers are in this income bracket, and they too can receive a maximum of $530 in tax relief.
The government has also announced plans to change the income tax thresholds to ward off bracket creep, which occurs when pay rises and overtime bonuses are eaten up by higher taxes.
The 32.5 percent tax bracket will be extended from $87,000 to $90,000 from July 1, which means 210,000 Aussies earning more than $87,000 will no longer pay the 37c
If you earn $87 000 to $200 000
The tax offset will also apply to those earning more than $90,000 a year but will taper off to zero as incomes reach $125,000.
In 2022-23, the government will lift the marginal tax rate of 32.5 cents in the dollar from $90,000 to $120,000.
Then in 2024-25, it will abolish the second highest tax rate of 37c, shrinking the number of income tax brackets from five to four, by lifting the 32.5c marginal tax rate threshold from $87,000 to $200,000.
This means 1.8 million taxpayers would avoid paying the higher 37 percent rate and 94 percent of Australians would pay no higher 32.5c.
This is a significant adjustment to Australia’s progressive tax system, which is designed to ensure that those who earn more pay more tax.
This promise should be taken with a grain of salt, however, because it’s incumbent on the government staying in power for another seven years, or at least another two elections.
Changes to the Medicare levy low-income thresholds
The Medicare levy low-income thresholds for singles, families, seniors, and pensioners will be increased from the 2017/18 income year, as follows:
- The threshold for singles will be increased from $21,655 to $21,980;
- The family threshold for will be increased from $36,541 to $37,089;
- The threshold for single seniors and pensioners will be increased from $34,244 to $34,758; and
- The family threshold for seniors and pensioners will be increased from $47,670 to $48,385.
For each dependent child or student, the family income thresholds increase by a further $3,406, instead of the previous amount of $3,356
- Purchasers of new residential properties or new subdivisions will be required to remit the GST directly to the ATO as part of settlement from 1 July 2018.
- The GST treatment of digital currency (such as Bitcoin) will be aligned with that of money from 1 July 2017.
Farmers & Regional/Rural Australians
- Australia’s biosecurity is set to benefit to the tune of $121.6 million and agricultural export growth to $51.5m in new initiative big spends
- More than $260m for new satellite technology to enhance GPS applications such as smart farming.
- A third round of the Building Better Regions fund got $200m to fund local governments and not-for-profit organisations to develop new commercial enterprises.
Extension on $20,000 instant asset write‑off
The successful $20,000 instant asset write‑off, first introduced in 2015‑16 Budget, will be extended for a further 12 months to 30 June 2019. This will improve cash flow for small business, helping them to reinvest in their business and replace or upgrade their assets. Extending this measure means small businesses will have more opportunities to invest and grow.
Access to the small business CGT concessions will be tightened from 1 July 2017 to deny eligibility for assets which are unrelated to the small business.
10-year Enterprise Tax Plan
The government remains committed to the 10-year Enterprise Tax Plan to drop company tax rates down to 25% by 2026/2027
Superannuation Related Changes
No More Automatic Life Insurance Cover
The government will force Australia’s superannuation funds to stop charging young savers for automatic life insurance cover. The government will also announce measures aimed at ending life insurance cover for funds where no contributions have been made for a period of 13 months.
The proposals will be a significant blow for the wealth management industry, which has faced escalating criticism for eroding the retirement savings of younger Australians.
Limiting fees on low balance accounts
High fees can make it impossible for many Australians with low balance accounts to grow or even maintain their balances.
The Government will protect these balances by capping certain fees on accounts with balances less than $6,000 at 3 percent.
Banning Exit Fees
The Government is making it easier and more affordable for Australians to consolidate their superannuation accounts by abolishing superannuation fund exit fees.
Work Test Exemption
Exemption from the superannuation work test for aged 65-74 where individual’s total superannuation balance is below $300,000; in the first year that they do not meet the work test requirements.