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Millions of Australians could potentially look forward to tax relief thanks to the latest federal budget announcement from Treasurer Josh Frydenberg. Together with measures to introduce more flexibility with late super contributions, many people could benefit from getting advice on how to make the most of these potential changes.
Personal income tax
With the Treasurer forecasting a $7.1 billion surplus in 2019/20, it’s no surprise that his announcement included tax relief that’s expected to benefit more than 10 million Australians. The following changes come on top of the Personal Income Tax plan announced in last year’s budget:
– From 1 July 2018, the Low and Middle Income Tax Offset (LMITO) will be increased to $1,080 per year. Taxpayers earning between $48,001 and $90,000 per annum (pa) will receive the maximum offset. Those earning between $37,000 and $48,000 and $90,001 and $126,000 pa will receive the offset at a reduced rate according to their income.
– From July 2022, the top threshold for the 19% tax bracket will increase from $41,000 to $45,000, together with an increase in the Low Income Tax Offset (LITO) to a maximum of $700 for people earning $37,500 or less
– From July 2024, the 32.5% marginal tax rate will be reduced to 30%. If this is legislated, Australians earning from $45,001 to $200,000 will pay no more than 30% tax on their taxable income.
– From July 2020, people aged 65 and 66 will no longer need to meet Work Test requirements – 40 hours or more of paid work over 30 consecutive days – to continue making voluntary super contributions.
– From July 2020, bring-forward arrangements will also be available to people aged 65 and 66. This allows eligible people to make three years’ worth of non-concessional (after tax) super contributions in a single year. Under this arrangement, they won’t be able to make any non-concessional contributions for the next two years, having already used their annual cap in advance.
– From July 2020 the age limit for receiving super contributions from your spouse will increase from 69 to 74.
Building on the funding boost seen to residential aged care in the 2018/19 budget, the federal government announced their commitment to provide funding for an extra 10,000 home care packages. This takes the total number of packages available to 40,000.
Plan with caution
These proposed changes will be welcome news to many working Australians, young and old, looking to plan for a more secure financial future. But it’s important to remember that new tax offsets and thresholds, and super contribution rules haven’t been legislated yet. With the federal election happening on 25 May this year, these changes certainly aren’t set in stone.
When it comes to planning for a secure income after leaving work, a CFP® professional specialised in retirement planning can help you maximise super savings, taking into account current and future policy around contributions. But they can also offer valuable advice to guide you in making all sorts of important decisions for your lifestyle and finances. Whether you’re undecided about when to retire, whether to downsize or what type of retirement income would suit you best, a CFP® professional will get to know you and what you’re looking forward to in retirement so that your choices about money will take you in the right direction.