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It’s fairly common news now what we can expect NOT to happen after the unexpected re-election of the Coalition, with respect to negative gearing, CGT, franking credits, etc.
But what CAN we expect from the Coalition based on recently legislated and proposed Bills?
INCOME TAX CUTS
Some of this is legislated and some proposed. In the 2018 budget we saw a range of cuts proposed, between then and 2024. For the current financial year the second tax bracket of 32.5% has been extended out from $87,000 to $90,000. For the 22/23 and 23/24 FY however most brackets are set to change, with the 19% rate extending out from $37,000 to $40,000 and the 32.5% extending from $90,000 out to $120,000. From the 24/25 FY a huge change is planned, with effectively a removal of a tax bracket and anyone earning between $41,000 and $200,000 will pay a marginal tax rate of 32.5%.
|18/19, 19/20, 20/21, 21/22,||22/23, 23/24||24/25 onwards|
|0 – $18,200||Nil||0 – $18,200||Nil||0 – $18,200||Nil|
|$18,201 – $37,000||19%||$18,201 – $41,000||19%||$18,201 – $41,000||19%|
|$37,001 – $90,000||32.50%||$41,001 – $120,000||32.50%||$41,001 – $200,000||32.50%|
|$90,001 – $180,000||37%||$120,001 – $180,000||37%|
|$180,001 and over||45%||$180,001 and over||45%||$200,001 and over||45%|
Note that all of the above is now legislated, however they have now proposed that the $41,000 threshold in tables 2 and 3 increase to $45,000 and the 32.5% tax rate in table 3 decrease to 30%.
Additionally to the above, in the April budget they introduced the “Low and Middle income tax offset”, which would provide up to an additional $530 to low income earners, which reduces as you earn more, and becomes nil once you earn $125,333. This is legislated, and they have since proposed to increase the “benefit” to $1,080 from $530 and have it phase out at $126,000.
So in summary, we are talking income tax cuts across the board already legislated, with further cuts now proposed.
COMPANY TAX WRITE OFFS
Already Legislated – Instant tax write off for small businesses up to $20,000, set to rise to $25,000 next year and $30,000 the year after.
As per last years budget, the coalition will continue its plan to allow “catch up” concessional contributions. This is whereby if you haven’t used the previous financial year’s $25,000 contribution limit, you can use it the following year in addition to the $25k for that year. This will now be available from July 1st and any unused contributions from 18/19 can be contributed in 19/20.
Work test requirements to be pushed out to age 67. Reminder that the work test is whereby after the age of 65 you need to work 40 hours in a consecutive 30 day period in order to contribute to Super. This has been brought in to reflect the fact that the age pension age has increased from 65 to 67 and for mine, is a welcome change allowing a bit more flexibility.
Likewise, the use of the bring forward rule will apply to those aged up to 67, instead of 65. Another way of putting it is that you need to be aged 66 at some stage of the financial year in order to use the bring forward rule in that year.
Possible related changes – Given that the work test is to be pushed back to age 65, there is the belief that other aspects of Super relating to age 65 may also be pushed back. For example, the “condition of release” that is turning 65, may be put back to 67. Similarly, regards the downsizers rule allowing a $300k contribution if you sell the family home – currently it is only available to those over 65. Will this become 67 also?
Spouse contributions – age of eligibility being extended from age 69 to age 74.
Insurance to be cancelled for inactive Super accounts – as per our recent one-off publication.
Super exit fees banned.
FIRST HOME DEPOSIT SCHEME
The Government is set to “guarantee” loans for first home buyers, and further more that no lenders mortgage insurance will apply. Eligibility requirements include the fact that you must save a 5% deposit. You will need an individual income of under $150k or combined income (with spouse) of under $200,000. Finally, the value of the properties will be capped to a level not yet specified. The cap will be regionally done, i.e. higher value allowed for Sydney, etc. Interestingly the Government is saying that the number of people allowed to do it will be capped at 10,000, so presumably they will be working on a “first come, first served” basis. This kick starts on 1st January 2020.
As well as additional funding from the Government they intend to try and simplify the means testing forms for those entering an aged care facility.
LAPSED BILLS gone by the wayside due to the election
SS not to affect SG – Currrently, believe it or not, if a person earns $100k and salary sacrifices $10k, the employer only technically has to pay Super Guarantee (9.5%) on the $90k. This was due to be prevented but the bill has lapsed, and it is suspected this proposal will be reinstated.
NON RESIDENTS CAN’T USE CGT exemption – currently, if a person goes over seas they can still use the 6 year rule and sell their old PPR CGT-free within a 6 year period. This allowance was set to be removed for non-residents and the bill has now lapsed and it is unsure if it will be re-instated.