Scott Morrison has delivered a budget that is aimed squarely at sweetening middle Australia in the run-up to an election year. A combination of “goodies” — albeit fairly modest ones — have been made possible by a recent $30 billion surge in tax receipts.
The good news for the over 50s is that plenty of the budget treats are directed at those who are heading toward retirement or are already in it. Here’s our budget breakdown on the key initiatives that could impact you.
A ‘sugar hit’ for personal taxpayers
For income earners, a low income tax offset plan will provide some welcome tax relief in the 2018/19 tax year. It’s important to note that this will come in the form of a lump sum payment after you submit your tax return for that tax year, rather than being a reduction in tax paid throughout the year.
- If you earn up to $37,000, your offset will amount to $200.
- If you earn between $37,000 and $48,000, this amount increases incrementally up to a maximum amount of $530, the amount those earning between $48,000 and $90,000 will receive.
- For incomes higher than $90,000, the level of benefit tapers off until it reaches zero for incomes over $125,000.
Flattening personal income tax
The other major change to personal income tax is a “flattening” of tax brackets. From July next year, the top income threshold for the 32.5 per cent tax bracket will shift up from $87,000 to $90,000. This means those earning more than $90,000 a year will be another $135 per year better off.
In 2022, the top threshold of the 19 per cent tax bracket will be increased from $37,000 to $41,000, and the top threshold of the 32.5 per cent bracket will increase to $120,000.
The last stage of the plan will happen on 1 July 2024, when the 37 per cent tax bracket will be abolished altogether, and earnings between $41,000 and $200,000 will all be taxed at 32.5 per cent.
Limiting super erosion
A package of measures has been announced to help curb the erosion of super balances — particularly for those at the lower end of the scale. This includes:
- A three per cent annual cap on fees for accounts with less than $6,000.
- Exit fees on all superannuation accounts will be banned, which will free up workers to consolidate their super and reduce instances of fee duplication.
- The tax office will be given the power to proactively “reunite” inactive super accounts to their owners if balances are under $6,000.
More earning freedom for pensioners
Those who have already moved into retirement and are receiving the Age Pension, but who want to supplement income by continuing to work, have been given a boost via improvements to the Pension Bonus Scheme. Under this scheme, the amount you can earn before your pension is affected has increased from $250 to $300 a fortnight. This means you can potentially earn up to $7,800 a year without impacting your pension.
This scheme has now also been opened up to the self-employed. And to help those who are looking for work, there will now be a wage subsidy of up to $10,000 for to employers who take on staff aged over 50.
Work test exemption
For those who are between 65 and 74 and want to continue contributing to their super, there is currently a Work Test requiring you to work at least 40 hours within 30 consecutive days in a financial year before your super fund can accept contributions. The budget has now introduced an exemption from this test for those with total superannuation balances below $300,000.
Boosting the Pension Loans Scheme
The existing Pension Loans Scheme allows pensioners who are claiming less than the full age pension to supplement their income by taking a loan from the government using their real estate as collateral. This scheme is to be expanded so that self-funded retirees and those on a full pension can now access these loans. This will enable them to increase their income by up to 50 per cent of the age pension.
Extra Home Care Packages
The existing Home Care Packages Program provides a government subsidy to help fund assistance that will allow individuals to remain in their own home, rather than going into institutional aged care. The budget is expanding this program with an additional 14,000 high-level Home Care Packages over the next four years.
Boosts for mental health
Mental health was given some welcome support in the budget with an increase of $338 million in mental health funding, primarily aimed at suicide prevention, research, and older Australians.
A further $83 million has been earmarked for psychological services in residential aged care, plus $20 million targeted at support services for older folk who are isolated.
- 2018 Federal Budget Overview
- 2018 Budget - Aged and Home Care
- 2018 Budget - Pension Loan Scheme
- 2018 Budget - Health Care
SPECIAL OFFER : As a WYZA reader you get a complimentary obligation-free initial consultation with one of our expert advisors through WYZA Money. Simply click Request An Appointment and fill in the form and we will be in touch within 24 hours.
This information was provided to the readers of WYZA courtesy of RFE Group Pty Ltd. RFE Group operates through the following entity: R Financial Educators Pty Ltd ABN 37 102 003 118; authorized representative of iPraxis Pty Ltd, AR 461048, iPraxis Pty Ltd AFSL 329337, ABN 39114365007
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this information, you should assess your own circumstances or seek advice from a financial planner and seek tax advice from a registered tax agent. Information is current at the date of issue and may change. WYZA Money is a partner of RFE Group Pty Ltd.