Written and accurate as at: 2 April 2019
The 2019-20 Federal Budget was delivered on 2 April 2019 by Treasurer Josh Frydenberg.
This is a month earlier than usual given it’s an election year, and the Government’s wish to hand down the Federal Budget before the next election (predicted to take place in May).
Through this lens, there have been many unofficial catchphrases making the rounds with regards to the Federal Budget such as Pre-Election Budget, Back in Black, Budgeting for a Miracle, and Pre-Poll Cash Splash.
This being said, the Federal Budget is being officially referred to by the Government as a ‘Stronger Economy, Better Future for Australians’.
Budget Overview
Budget Priorities
The Federal Budget priorities, and subsequent proposed measures, primarily focus on delivering in the following areas:
- a better tax system
- investing in economic and community infrastructure
- delivering skills for today and tomorrow
- guaranteeing essential services
- restoring trust in the financial system
Below is an overview of some of the proposed measures that may be relevant to you and your personal finances.
Fiscal Outlook
Budget Surplus
Based on forward estimates and medium-term projections, the budget is forecasted for a:
- -$4.2 billion deficit in 2018-19
- $7.1 billion surplus in 2019-20
- $11.0 billion surplus in 2020-21
- $17.8 billion surplus in 2021-22
- $9.2 billion surplus in 2022-23*
*According to the 2019-20 Federal Budget papers, “the temporary fall in 2022-23 reflects timing impacts associated with the legislated Personal Income Tax Plan and additional tax relief in this Budget.”
Taxation
Immediate Relief to Low- and Middle-Income Earners
The non-refundable low and middle income tax offset (LMITO) 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 financial years.
This is what it will look like for taxpayers with the following taxable incomes:
- ≤$37,000, $255
- from $37,001 to $48,000, $255 plus 7.5 cents per dollar above $37,000
- from $48,001 to $90,000, $1,080
- from $90,001 to $126,000, $1,080 minus 3 cents per dollar above $90,000
Locking in the Benefits of Lower Taxes
From 1 July 2022:
- the top threshold of the 19% personal income tax bracket will increase from $41,000 to $45,000
- the low income tax offset (LITO) will increase from $645 to $700 (and decrease at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000, and decrease at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667)
Importantly, taken together, these changes will make up for the removal of the LMITO on 30 June 2022.
Further Structural Changes to the Tax System to Deliver Lower Taxes
From 1 July 2024-25, the 32.5% marginal tax rate will reduce to 30%. Importantly, this proposed measure combined with the already legislated abolition of the 37% marginal tax rate in 2024-25, is projected to see 94% of taxpayers pay a marginal tax rate of 30% or less by 2024-25.
This is what it will look like for taxpayers with the following taxable incomes:
- ≤$18,200, nil tax
- from $18,201 to $45,000, nil plus 19% for each dollar over $18,200
- from $45,001 to $200,000, $5,092 plus 30% for each dollar over $45,000
- $200,001+, $51,591 plus 45% for each dollar over $200,000
Increasing the Medicare Levy Low-Income Thresholds
From the 2018-19 income year, the Medicare levy low-income thresholds will increase:
- from $21,980 to $22,398 for singles
- from $37,089 to $37,794 for families*
- from $34,758 to $35,418 for single seniors and pensioners
- from $48,385 to $49,304 for family seniors and pensioners
*For each dependent child or student, the threshold increases by a further $3,471 (previously $3,406).
Increasing and Expanding Access to the Instant Asset Write-Off for Businesses
From 7:30 PM (AEDT) on 2 April 2019, the instant asset write-off threshold will increase from $25,000 to $30,000 and apply until 30 June 2020*.
Also, medium-sized businesses (with an aggregated annual turnover of $10 million or more, but less than $50 million) will now also have access to the instant asset write-off.
*On 29 January 2019, the Government announced that it would increase the instant asset write-off threshold for small businesses (with an aggregated annual turnover of less than $10 million) from $20,000 to $25,000 and extend the instant asset write-off for an additional 12 months to 30 June 2020. This proposal is not yet law.
Strengthening the Australian Business Number (ABN) System
To disrupt black economy behaviour:
- from 1 July 2021, ABN holders with an income tax return obligation will be required to lodge their income tax return in order to retain their ABN
- from 1 July 2022, ABN holders will be required to confirm the accuracy of their details on the Australian Business Register annually in order to retain their ABN
Superannuation
Improving Flexibility for Older Australians
From 1 July 2020:
- those aged 65 and 66 will be able to make voluntary superannuation contributions (both concessional and non-concessional) without being required to meet the work test, and will also be able to make up to three years of non-concessional contributions under the bring-forward rule
- those up to and including age 74 will be able to receive spouse contributions
Reducing Red Tape for Superannuation Funds – Exempt Current Pension Income (ECPI)
From 1 July 2020:
- superannuation fund trustees with interests in both the accumulation and retirement phases during an income year will be able to choose their preferred method of calculating exempt current pension income (ECPI)
- superannuation funds will not be required 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
SuperStream Rollover Standard – Self-Managed Superannuation Funds Rollovers
The start date of Self-Managed Superannuation Funds rollovers in SuperStream will be delayed until 31 March 2021 (previously 30 November 2019) to coincide with the expansion of the SuperStream Rollover Standard.
Tax Integrity — Increasing Engagement and On-Time Payment of Tax and Superannuation Liabilities
The Government will provide $42.1 million over four years to the Australian Taxation Office (ATO) to increase activities to recover unpaid tax and superannuation liabilities, with a focus not on small businesses, but rather larger businesses and high wealth individuals.
Social Security
Energy Assistance Payment
The Government will provide $284.4 million over two years from 2018-19 to make a one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple ($125/couple) eligible for qualifying payments on 2 April 2019 and who are resident in Australia.
Please note: Qualifying payments include, for example, the Age Pension, Carer Payment, Disability Support Pension, Parenting Payment Single, and Veterans’ pensions and payments.
Funding for Aged Care Services
The Government will provide:
- $5.9 billion over two years from 2020-21 to extend the Commonwealth Home Support Programme (CHSP) funding arrangements
- $320.0 million in 2018-19 for a one-off increase to the basic subsidy for residential aged care recipients
- $282.4 million over five years from 2018-19 for the release of an additional 10,000 home care packages across the four package levels
Other Measures
The Government will provide:
- $606.7 million over five years from 2018-19 to facilitate the Government’s response to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
- $18.0 million over six years from 2019-20 for households and businesses to improve energy efficiency and lower energy bills
- $3.1 million over two years from 2018-19 to exempt net income generated from the forced sale of livestock from Farm Household Allowance (FHA) payment assessment, when that income is invested into a Farm Management Deposit to help them retain access to income support
Moving Forward
Whilst there were many other proposed measures contained within the 2019-20 Federal Budget, we have focused predominantly on the ones that may relate to you and your personal finances.
For more information on this year’s Federal Budget and what it may mean for you, please watch:
- Guardian Australia’s political editor Katherine Murphy highlight the political context
- ABC’s national affairs correspondent Greg Jennett explain the key numbers
- PwC’s chief economist Jeremy Thorpe discuss his thoughts
Please contact us if you wish to discuss any aspect of this year’s Federal Budget or how it may affect you.