Australian Federal Budget 2019-20

The 2019-20 Federal Budget has focused on infrastructure and essential services spending as well as income tax relief for low and middle income earners and business tax relief.

Bryan Ashenden, Head of Financial Literacy and Advocacy at BT, provides an update on the impacts of the Federal Budget to you and your clients.
Bryan Ashenden, Head of Financial Literacy and Advocacy at BT, provides an update for customers on the key Federal Budget Announcements.
Bryan Ashenden, Head of Financial Literacy and Advocacy at BT, provides an update on the impacts of the Federal Budget to SMSFs
Bryan Ashenden, Head of Financial Literacy and Advocacy at BT, provides an update for advisers on the key Federal Budget Announcements.

Read the Federal Budget summary video transcript

Bryan Ashenden: On the 2nd of April 2019 the Federal Government handed down its budget for 2019-20. The government has been very clear to call out the level of surpluses that they are now looking to deliver. With a $7.1 billion dollar surplus projected for 2019-20 totaling $45 billion dollars over the next four years. The Government is increasing its expenditure on infrastructure and essential services and is committed to do this without raising taxes.

Clearly in the lead up to this year's Federal Budget, there has been a focus on the Government expecting to deliver tax reform particularly for individuals and they have done this but perhaps not in the way that was originally expected. The first thing the Government has announced is that the low and middle income tax offset that was first announced in last year's Federal Budget will actually be more than doubled, increasing from a maximum tax offset of $530 dollars for eligible individuals, now to a level of $1080 dollars. The benefits will be available for people on incomes of up to $126,000 dollars and it just depends on what your income level is as to how much you can get.

In addition to this the Government has announced some further changes to the marginal tax rate thresholds and tax rate changes that they announced in last year's Budget. From the 1st of July 2022, the 19% marginal tax rate will be available for clients on taxable incomes of up to $45,000 dollars and then from the 1st of July 2024, the current 32.5% marginal tax rate will be reduced to 30%. Now most people had expected that the government is actually going to accelerate the timing of these tax changes, but they have instead decided to leave them in place.

From a superannuation perspective, there have been minimal changes announced this year but there are important changes that they did discuss and largely what these do is enable people to contribute to superannuation for a longer period of time without the need to meet a work test. From the 1st of July 2020, it's proposed that the current rules that apply up to age 65 will instead apply up to age 67, which will also mean that people within those years can actually then use the three year bring forward provision. So it gives them the ability to contribute more to super for a longer period of time. In addition to this the government is actually proposing that they'll increase the ages for which it's possible to make a spouse contribution into super. Currently, this cuts out at age 69 but will be extended through to age 74. And again these proposals will take effect from the 1st of July 2020.

From a welfare perspective, there weren't significant changes that were announced. Certainly there has been increased funding that's been earmarked for aged care and for people who want to stay at home for additional care, but also there will be a one-off payment of $75 dollars for individuals and $125 dollars for couples, an immediate payment that will help them meet the cost of the next power bill.

Now as is always the case with Budget night announcements at this point that is all they are. They are just announcements and it's important that clients don't go and take action based just on these. With an election expected to be called for May this year, it is likely that we'll have to wait for the return of the current government and then for things to go through the legislative process for tonight's announcements to actually see law.

Read the Federal Budget SMSF video transcript

Bryan Ashenden: On the 2nd of April 2019 the Federal Government handed down its Budget for 2019-20. Now the centerpiece of the Government's budget this year is the return to surplus. With a forecasted surplus for the next financial year of $7.1 billion dollars amounting to almost $45 billion dollars over the next four years.

Now for self managed super fund trustees there weren't a lot of significant announcements in this year's Federal Budget. However, there were three changes to superannuation that are important to be aware of. The first of these which is due to take effect from the 1st of July 2020 is an increase in the age at which contributions can be made into super without the need to satisfy a work test. Currently those rules apply up to the age of 65 after which you have to meet a work test of 40 hours of gainful employment within a 30 day period. It's proposed that will now change to kick in at age 67 meaning there'll be an extra two years for eligible individuals to contribute more money into super without the need to satisfy that work test.

As a flow on consequence of that change, the ability to use a three year bring forward provision which could mean you can contribute up to $300,000 in one contribution, will actually also be available up into the year a person turns age 67.

And then finally the Government has also proposed that from the 1st of July 2020 they'll increase the ages at which a person can receive a spouse contribution. Currently, the ability to receive a spouse contribution cuts out at age 69 but the Government has proposed that that will increase to age 74 which again means there's an extended period of time in which people will have the ability for their superannuation savings to be topped up. Now all other eligibility requirements around these rules will continue to apply such as the requirement that a member needed to have less than $1.6 million dollars as a total super balance at the previous 30 June.

As an SMSF trustee, there aren't a lot of things that you can do at the moment because we do need to wait for these changes to become law. And as this is an election year and with the election expected to be held in May, it may be some time before we see these measures come through in final legislation. But for SMSF trustees there are still some things that you can consider.

It's important to always think about the trust deed for your fund and do you need to make changes if these things were to come through. For example are the rules about contributions to your fund that specific that you actually have particular ages specified in the trust deed as opposed to a general reference to the contribution rules under superannuation laws and regulations. If you have trustees that are specific and these changes do come through, then changes will need to be made. However you don't need to make those changes at this point in time. What's really important for SMSF trustees to be aware of is to make sure that they are seeking professional advice about all the raft of changes that are coming through to superannuation, both from this year's budget and from previous years and to make sure that their deeds and their processes are up to date with those requirements.

Read the Federal Budget customer video transcript

Bryan Ashenden: On the 2nd of April 2019 the Federal Government handed down its Budget for 2019-20. As a result of the measures that the Government has announced, they're expecting that there'll be a $7.1 billion dollar surplus generated for 2019-20 and over the next four years it'll amount to over $45 billion dollars and the Government has said that they can do this without delivering any increases in taxes.

In fact for most individuals the major focus has been what level of personal tax reform will Government provide. And they have done this for you in a couple of different ways. The first one is that the Government has made some changes to a new low and middle income tax offset that they announced in last year's Federal Budget. Under the initial proposals for the current financial year eligible individuals could have got a tax offset or a direct tax saving of up to $530 dollars. The Government has now proposed that they will more than double that to a maximum level of $1080 dollars. And if they are elected and they get this change through it'll immediately kick in when you lodge your tax return for the current financial year. Now depending on your income level there may be some benefit that's available for incomes of up to $126,000 dollars. So it's important that you work out what the implications would be for you in your personal circumstances.

One of the other expected announcements in the lead up to this year's Federal Budget was if the Government would actually accelerate the level of changes around marginal tax rates and thresholds that were announced in last year's Budget. Ultimately the Government had decided not to do this, but they have still made some changes to rates and thresholds. Currently the 19% marginal tax rate applies on a taxable income of up to $37,000 dollars. And it was proposed from the 1st of July 2022 to increase that to a $41,000 dollar level of taxable income. The Government has now stated that it will actually increase it to a $45,000 dollar level of taxable income and then from the 1st of July 2024 the current 32.5% marginal tax rate will be lowered to a flat 30% marginal tax rate.

From a superannuation perspective, there weren't many changes announced in this year's Federal Budget which is certainly a change from what we've seen in previous years. However the changes that they did announce are of significant benefit. What the Government has proposed is that from the 1st of July 2020 you'll actually be able to contribute to superannuation up until the age of 67 without the need to meet a work test. Currently the absence of the work test only applies up until you turn 65. Now this can create some further opportunities that you can use what's called a three bring forward rule for an extra couple of years. But overall what it amounts to is the ability to get more money into super through to your retirement years. They've also announced their intention that from the 1st of July 2020 they'll extend the ability to make a spouse contribution to a spouse who is aged up to age 74, whereas currently that cuts out at age 69.

From a welfare and social security perspective there's been additional funding earmarked for aged care and stay at home care support and also a one off payment of $75 dollars for a single person or $125 dollars for a couple, if you are in receipt of an allowance or an income support payment from the Government.

Now what's very important for you to bear in mind that at this stage all we have are announcements on Budget night. These things do not take effect until they have actually passed through a legislative process and with an impending election likely to be called for May, it may be some time before we get a final version of legislation. What's most important though, is that you actually seek professional advice that is specific to your personal circumstances so please speak with a financial adviser.

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Any case studies and examples used on this website are purely for illustration only.

The tax position described on this website on the 2019-20 Federal Budget update is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. It is important to note that the policies outlined on this website are yet to be passed as legislation and therefore may be subject to change or further refinement. Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investments held in superannuation. The Government has set caps on the amount of money that you can add to your superannuation each year and over your lifetime on both a concessional and non-concessional tax basis.  There will be tax consequences if you breach these caps.  For more detail, speak with a financial adviser or registered tax agent or visit the ATO website.