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Federal budget 2019: tax cuts the big focus


Published 3 April 2019

There’s flexibility in super for seniors, and tax cuts for many, writes Melinda Livingstone.

With an election to be held in coming weeks, the Morrison government is wooing Australians with a proposed tax-cut package that it says is worth $302 billion over 10 years.

Treasurer Josh Frydenberg (pictured) handed down the proposed 2019-20 budget last night in Parliament, declaring a return to surplus, meaning the government will be saving more than it is spending for the first time in 12 years.

About 4.5 million low and middle-income earners earning between $48,000 and $90,000, would receive a yearly tax rebate of $1080 under the proposals. An additional 5.5 million earning less than $48,000 and earning between $90,000 and $126,000 may be entitled to a partial rebate. 

The government is proposing to double the value of the package of tax cuts it announced last year. By 2024 it plans for 94 per cent of taxpayers (everyone earning up to $200,000) to pay no more than 30 cents in the dollar in income tax.

Proposed tax threshold changes

Proposed tax threshold changes

Tax rate (%)

Current ($)

July 1, 2022 ($)

Tax rate (%)

July 1, 2024 ($)

0

0-18,200

0-18,200

0

0-18,200

19

18,201-37,000

18,201-45,000

19

18,201-45,000

32.5

37,001-90,000

45,001-120,000

30

45,001-200,000

37

90,001-180,000

120,001-180,000

(no longer exists)

45

180,001-plus

180,001-plus

45

200,001-plus

 

Super contribution rules eased for seniors

In a pitch to older voters, the government proposes a number of super changes from July 1, 2020.

Those aged 65 and 66 will no longer be required to meet the current work test to make voluntary super contributions.

They would also be able to make three years’ worth of after-tax contributions to their super accounts in one year, in what is known as the ‘bring forward’ rule. This creates the opportunity to boost super savings by up to $300,000 in a single tax year.

Retired couples would be able to share their super easier, which could be a notable benefit for those struggling with the $1.6 million tax-free pension threshold limit.

For example, one spouse exceeding the $1.6 million limit may be able to move up to $300,000 from their super into their spouse’s lower balance super account if the spouse is under age 67.

The government also intends to increase the age limit for those receiving spouse contributions from age 69 to 74.

The Association of Superannuation Funds of Australia described the super proposals as confidence building and optimistic for retirees.

“The government has today taken the opportunity to reaffirm their commitment to retirees by leaving the system alone,” concluded the association’s chief executive officer, Martin Fahy.

Weathering a slowing global economy

According to ANZ economists Cherelle Murphey and David Plank “the economy will receive a boost within four months with the government offering cash payments, personal income tax cuts, a bigger business instant asset write-off and small additions to infrastructure in the 2019-20 budget”.

But they have a “slightly more pessimistic” outlook for the years ahead, with lower expectations than the government for growth in the economy, employment and wages.

In his budget speech, Frydenberg (pictured) said the fundamentals of the Australian economy are sound, but there are genuine and clear risks emerging both at home and abroad.

“The residential housing market has cooled, credit growth has eased and we are yet to see the full impact of flood and drought on the economy.”

It is the forecast return of the federal budget to surplus he seemed most satisfied with, despite the world’s economic troubles.

In 2019-20 the government proposes a budget surplus of $7.1 billion, then ranging from $9.2 billion to $17.8 billion in the next three years.

The planned tax cuts are key to keeping consumers spending and turning the wheels of the Australian economy.

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The statements in this publication are based on an interpretation of the proposed Federal Budget 2019/20 announced on 2 April 2019 (the Budget). The Budget is subject to the passing of legislation and, accordingly, may not become law or may change significantly from what was announced. You should not rely on this interpretation and should consider any changes to the Budget.

The information, opinions and conclusions in articles ("information") are current as at the date articles are written as specified within but is subject to change. The articles are provided and issued by ANZ unless another author is specified in the article, in which case it is provided and issued by that author. The views expressed are those of the authors only and do not necessarily reflect the opinions or views of ANZ, its employees or directors. Whilst care has been taken in preparing this material, ANZ and its related entities do not warrant or represent that the information is accurate or complete. To the extent permitted by law, ANZ and its related entities do not accept any responsibility or liability from the use of the information.

Taxation law is complex and this information has been prepared as a guide only and does not represent tax advice. Please see your tax adviser for independent taxation advice.

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