WHAT DOES THE 2019 FEDERAL BUDGET MEAN FOR YOUR SUPERANNUATION & RETIREMENT?
Despite the release of the latest Federal Budget in early April, it’s fair to say that unless the Coalition remains in power, none of Josh Frydenberg’s budget promises may come to fruition. This is because the new government will likely write their own budget.
Nevertheless, it’s worth taking a look at the 2019 Federal budget, because if the Coalition remains in government after May’s election, many people could benefit from Frydenberg’s proposals.
Specifically, changes to personal income tax and superannuation may help you to better manage your finances both today and in retirement.
Personal income tax changes
Australians have waited a long time for some positive changes to their personal income tax rates and with the expected budget surplus in 2019-20, Frydenberg has finally delivered some potential relief.
Tax relief was also the focus of the 2018 Federal budget where the government set in place a plan that would provide significant relief to low and middle income workers. Aimed at both raising and simplifying the tax brackets, the first stage of the government’s plan was to give workers earning $125,333 or less per year a tax offset when then submit their tax returns for the current financial year (2018/19).
This tax offset will be graded according to how much you actually earn with the maximum offset being given to those earning between $48,001 and $90,000 per year. In Frydenberg’s 2019 budget, these tax offsets will be increased, however the maximum offset will still be received by the $48,001 and $90,000 earners.
As an example, if you are in the middle tax bracket ($48,001 and $90,000) you should receive the full tax offset of $1080 when you submit your tax return this year.
Unfortunately, we will have to wait until 2022 to see the 19% tax bracket increase from $41,000 to $45,000 and in 2024, the 32.5% tax rate will be lowered to 30% for workers earning between $45,001 and $200,000. This means that you will have much more money in your pay packet, depending on your annual income.
It also means however, that this may only happen if the government doesn’t change in May, following the election.
Changes to superannuation are mainly focused on helping Aussies close to retirement top up their voluntary super contributions. So in 2020, if you are 65 or 66 years of age, you can make voluntary payments to your super without meeting the Work Test requirements (at least 40 hours work in 30 consecutive days). You will also be able to top up your super by paying three years of non-concessionary contributions in a single year, but that stops you from making any more after tax contributions in the next following years.
Frydenberg has also proposed that the age limit to receive super contributions by your spouse will be increased from 69 to 74 years of age.
If you need help sorting through how these changes will affect your super and retirement, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.