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Federal budget 2019: super rules eased


3 April 2019






More relaxed rules around superannuation were among the few proposals affecting the wealthy,
explains Melinda Livingstone.

Federal Treasurer Josh Frydenberg handed down the budget last night, claiming a significant achievement forecasting a return to surplus after 12 years of deficits.

In a budget aiming to please the electorate several weeks before a national election, it was business owners and low to middle-income earners that were the obvious ‘winners’.

But there were some proposals, mostly around superannuation, that will be of interest, and likely benefit, to Australia’s wealthy.


Federal Treasurer Josh Frydenberg delivered the 2019 budget in Parliament on Tuesday night. Source: AAP

Super rules relaxed for seniors

In a budget proposal entitled ‘Superannuation – improving flexibility for older Australians’, the government has proposed to relax some rules around contributions from July 1, 2020.

Currently those allowed to contribute up to three years’ worth of after-tax super contributions (up to $300,000) in a single year must be aged 64 or younger. The proposal is to increase this age to 66 and younger.

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.

(For example, one spouse exceeding the threshold, and drawing a pension, could move up to $300,000 into their spouse’s lower balance super account, assuming the spouse is under the age of 67.)

The work test to make voluntary superannuation contributions would be raised from age 65 to 67. (Under the work test, only those working 40 hours in a 30-day period in the relevant financial year could make a contribution.)

This means the work test also won’t apply to those receiving spouse contributions if they are aged less than 67. Spouse contributions are contributions up to $3000 made to spouse’s super account for which the person can claim an 18 per cent tax offset up to $540 depending on the spouse’s income. The age limit for a receiving spouse will be raised from 69 to 74.

For self-managed super funds that are in the pension phase, the government’s proposal would give trustees the flexibility to choose the method for calculating exempt current pension income (ECPI) from July 1, 2020.

In addition, funds would no longer need to obtain an actuarial certificate when calculating ECPI using the proportionate method if the SMSF was fully in the retirement phase for all of the income year.

These proposals should simplify reporting and reduce costs.

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Some breaks for SMEs

Effective immediately, businesses earning up to $50 million a year can claim immediate deductions, rather than a staged depreciation, for assets worth up to $30,000.

This is a sizeable jump from existing limits (of assets worth $25,000 and businesses earning up to $10 million) which means 22,000 more businesses can use the ‘instant asset write off’.

"Already more than 350,000 businesses have taken advantage of the instant asset write-off rules. And now, even more will have the chance to do so," said Frydenberg.

The greatest benefit would be felt by businesses in industries with large-scale investments with long depreciation timeframes. The new rules are set to remain in place until June 30, 2020.

Also for businesses with a turnover of less than $50 million a year, their tax rate will be lowered to 25 per cent by 2021-22.

Weathering a slowing global economy

Both the government and economists acknowledged the increasingly difficult global economic environment. The Treasurer referred to continuing domestic growth as “a testament to the strength of the Australian economy”.

Commentators said the tax cuts would boost the economy. They are valued at $302 billion over the next 10 years. ANZ's chief investment office said they’ll likely be of particular benefit to retail stocks.

“Of course the broader economy will benefit from the increased tax rebates that come at a time when wages growth is slow and household debt is high. The later tax cuts will provide longer-term benefits for the household sector,” said ANZ's chief investment office.

“The infrastructure spending initiatives will benefit the listed contractors and building material suppliers and provide ongoing broader jobs growth.”

“Overall the government surprised no one by using its war chest in the lead up to the May election. We don’t see this Budget impacting our portfolio positioning”

Proposed tax threshold changes

Proposed tax threshold changes

Tax rate (%)

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July 1, 2022 ($)

Tax rate (%)

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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”.

“The most substantial tax cuts don’t come into effect until 2022-23, as was the plan in last year’s budget but the extension of last year’s tax changes provides a meaningful contribution to household income growth. This will offset some of the impact of high household debt, falling house prices and low wage growth.”


For more budget coverage refer to ANZ bluenotes Federal budget 2019: full coverage

To discuss what this insight could mean for you, talk to your ANZ Private Banker directly, or contact us below.

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The statements in this presentation 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. Changes in Government policy and legislation may dramatically alter the information, opinions or conclusions in this presentation ("information"). You should not rely on this interpretation and should consider the Budget and any subsequent changes yourself.

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