Rewarding working Australians
The 2019 Federal Budget focuses on rewarding working Australians, with the emphasis on a two-pronged approach for “hard-working” individuals.
From the 2018-2019 income year, the low and middle-income tax offset (LMITO) has been increased by $550. This now means individuals can have their tax reduced by up to $1,080 and dual income families up to $2,160 after lodging tax returns for the 2018-19 year.
In 2024-25, the 32.5% tax rate will be reduced to 30%, creating only three tax brackets for Australians. It is projected that by 2024-25, 94% of taxpayers will face a marginal rate of 30% or less. With this new plan, the 19% rate threshold (24% of taxpayers) will be increased from $41,000 to $45,000, the 30% rate (70% of taxpayers) will be $45,001 to $200,000 and the 45% rate (6% of taxpayers) will be over $200,000.
Extended super for older Australians:
Older Australians will benefit from the work test exemption age being extended from age 64 to 66. The work test requires an individual to work at least 40 hours in any 30 day period in the financial year in order to make voluntary personal contributions.
This change in age will now allow individuals aged 65 and 66, who previously didn’t meet the work test, to contribute three years of after-tax contributions in a single year, meaning up to $300,000 can be injected into an account with less than $1.6 million in super (tax-free pension threshold). This adjustment aligns with the increase for the Age Pension from 65 to 67.
Spousal contributions can now be made until age 74, up from age 65, without having to meet the work test. Under spousal contribution regulations, an individual can claim an 18% tax offset of contributions up to $3,000 made on behalf of a non-working partner. A further $3,000 can be contributed but with no tax offset.
For an overview of the Federal Budget - read our Federal Budget - Tax and Accounting Overview
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