The biggest change to personal tax rates was announced by the Treasurer ahead of time, with the Labor party stating that they are open to bringing forward the next stage of tax cuts. The cuts in question were due to begin 1 July 2022, but have now been brought forward and back dated to 1 July 2020. The tax rates for the rest of the year will factor in the backdating of this announcement once the law is passed. Finally, the Low and Middle Income Tax Offset of $1,080 will remain in place for another year, with an enhanced Low Income Tax Offset (now $700 rather than previous $445).
Assuming these tax cuts are ratified, the current resident tax rates are:
Medicare is an additional 2% where applicable, so the top marginal rate is effectively 47%
The Government is more or less relying on people to spend this additional income to try and get the economy back on its feet as quickly as possible.
The third and final stage of changes to personal tax rates announced is to; reduce the 32.5% tax rate down to 30% and applying this to taxable incomes ranging from $45,000 – $200,000, meaning 94% of taxpayers will not pay more than 30%. This is still intended to occur from 1 July 2024.
Based on Budget announcements resident tax rates from 2024-25 will become:
Cash payments for welfare recipients
Two payments of $250 will be made, one in December 2020 and one in March 2021, to recipients of certain welfare. The recipients will be people who receive: age pension, disability support pension, carer payment, family tax benefit, family tax benefit lump sum, double orphan pension, carer allowance, Commonwealth seniors health card and veteran card.
Changes announced to superannuation will certainly impact retirement savings of members over the long term, but they are not changes that members can really act upon. Rather they are imposed on the large superannuation funds and are intended to enhance transparency and rationalise costs.
The announcements can be summarised as:
- A new superannuation account is not automatically created when someone starts new employment.
- Reforms will be made to make it easier for superannuation accounts to follow people’s employment.
- There will be annual performance testing and reporting for superannuation funds, conducted by the Australian Prudential Regulation Authority, starting 1 July 2021.
- There will be a new online tool that makes it easy for people to compare the performance and fees of superannuation funds.
It is worth mentioning the following measures which were announced in last year’s Budget. These have not yet passed in to law, but they are before Parliament and are expected to become law this financial year. These are announced to apply from 1 July 2020.
Increasing number of Self Managed Superannuation Fund members from 4 to 6
This was originally intended to apply from 1 July 2019. The start date has been revised to be the date of the enabling legislation receiving Royal Asset.
Super contributions ‘bring forward rules’ to be extended
Recently the work test was extended allowing people aged 65 and 66 to contribute without needing to meet the works test prior to making their contributions. The law is also to be amended so that these people can also access the three year bring forward rule for non-concessional contributions, subject to those particular rules still being satisfied.
Spouse contributions age limit increase
The age limit for making spouse contributions is currently set at 70, meaning that people aged over 70 cannot receive contributions made by another person on their behalf. From 1 July 2020 this age limit will be increased from 69 to 74.
See our separate coverage on Federal Budget 2020 announcements affecting businesses. If you would like to know more about how the Federal Budget announcements could you and your superannuation, please get in touch with your local Accru advisor.