On Tuesday 8 May, the Federal Government handed down its Budget for the 2018–19 financial year. This is the third Budget delivered by Treasurer Scott Morrison and is likely to be the final Budget before the next federal election.
According to the Treasurer, this year’s Budget measures will provide tax relief to individuals and families, as well as supporting the needs of older Australians.
Here are some of this year’s key Budget announcements that could potentially impact your financial situation. Note that each of these proposals will only become law if passed by Parliament.
With the next federal election looming, it’s not surprising that the Coalition has promised to deliver a range of tax cuts for people at various income levels.
The government’s three-point plan for income tax reform will begin with a new tax offset for low and middle income earners, worth up to $530 a year. This will be followed by further tax cuts to tackle ‘bracket creep’ and will conclude with a tax break for high earners, due to take effect in the 2024–25 financial year.
In other good news, the government has reversed its decision to increase the Medicare Levy by 0.5% from July 2019. So if you’re required to pay this levy, for the meantime it will continue to be calculated at 2% of your taxable income. What’s more, the low-income thresholds for the Medicare Levy are set to increase on 1 July 2018, which means that a larger pool of low income earners won’t be charged the levy at all.
Following the widespread changes to the superannuation system in recent years, the super initiatives announced in this year’s Budget are comparatively minor. However, one proposed measure will see a temporary exemption of the work test for people aged 65–74, giving eligible retirees an extra year to make voluntary super contributions once they leave the workforce. The usual caps for concessional and non-concessional contributions will still apply.
For younger workers, and people with low super balances, the government plans to change the rules around life insurance held through super. From 1 July 2019, this insurance will move from a default framework to instead be offered to these members on an opt-in basis.
Support for older Australians
The government is also proposing a wide of range of initiatives to help older Australians make the most of their finances and access the care and support they may need later in life.
For instance, the Pension Work Bonus will be increased by $50 a fortnight from 1 July 2019 for age pension recipients who want to keep working in retirement. This will allow eligible pensioners to earn up to $300 per fortnight with no impact to their pension entitlements.
Also from 1 July 2019, every age pensioner will be able to access the current Pension Loans Scheme so they can enhance their standard of living. Under this scheme, pensioners can ‘top up’ their pension payments with a loan from Centrelink, using their home as security. If legislated, the maximum top-up payment will also increase from 100% to 150% of the maximum age pension rate.
In terms of aged care, the government has pledged $1.6 billion over the next four years to support an additional 14,000 packages for Australians who wish to receive aged care in their homes. The government’s proposed improvements to the My Aged Care website will also make it easier for older Australians to navigate the aged care system and access the services they need.
Get the right advice
Everyone’s financial situation is unique, and these proposals may affect people in different ways. To find out more about the 2018–19 Federal Budget and what it could mean for your superannuation strategy or tax position, speak to a financial adviser or tax professional.
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