Federal Budget 2018

Proposed changes that may affect you

Removing exit fees and reuniting many Australians with their lost or inactive super accounts were among the key superannuation measures announced in the 2018/19 Federal Budget.

Superannuation changes

New fee caps and removal of exit fees

From 1 July 2019, a 3% annual cap on fees will be applied to accounts with balances below $6,000. In addition, exit fees on all superannuation accounts will be banned.

Insurance within superannuation

From 1 July 2019, the government is proposing to make default life insurance cover within superannuation an opt-in extra for young people under 25 as well as for those with low (a balance of less than $6,000) or inactive (where a contribution has not been received for 13 months) accounts. Affected members will have a period of 14 months to decide whether to opt-in their existing cover, or allow it to be removed from their super account.

Reuniting with lost or inactive accounts

From 1 July 2019, all super accounts with balances below $6,000 that have not received a contribution for 13 months will be classified as inactive and transferred to the Australian Taxation Office (ATO). The ATO will then use data matching to automatically consolidate these accounts with members’ active accounts where possible.

Work test exemption

From 1 July 2019, people aged between 65 and 74 with a super balance below $300,000 will be allowed to make voluntary contributions for the first year that they no longer meet the work test requirements. Existing annual concessional and non-concessional caps ($25,000 and $100,000 respectively) will continue to apply to contributions made under the work test exemption.

Changes for pensioners

Pension Work Bonus Scheme

The Pension Work Bonus allows pensioners to earn up to $250 each fortnight without reducing their Age Pension payments. It’s proposed that from 1 July 2019, the Work Bonus be increased to $300 per fortnight ($1,300 a year).
It will also be extended to the self-employed who’ll be able to earn up to $7,800 a year without reducing their pension payments.

Pensions Loan Scheme

The Pensions Loan Scheme is a reverse-mortgage style scheme that enables retirees to release equity in their home to boost their retirement income. It’s currently only available to retirees who are eligible for a part Age Pension.
The government proposes to extend the scheme to all retirees from 1 July 2019, which will enable everyone over pension age to boost their retirement income by up to $17,800 per couple without losing the Age Pension or other benefits.

Aged care

An additional 14,000 high-level home care support packages will be introduced over the next four years, allowing Australians to stay in their own homes longer. 

Other changes that may affect you

Low income tax offset

From 1 July 2019, the government will introduce a low-income tax offset (LITO) in which those who earn up to $37,000 will see their tax bill reduce by $200. The offset increases incrementally for those earning between $37,000 and $48,000, before the maximum offset of $530 is applied to those earning between $48,000 and $90,000. The benefit then gradually decreases to zero at a taxable income of about $125,000.

No increase to the Medicare levy

The proposal from last year’s Budget to increase the Medicare levy from 2% to 2.5% will not proceed.

Cash payment limits

From July 1 2019, the government proposes to introduce a limit of $10,000 for cash payments made to businesses for goods and services in an effort to curb payments they believe are falling outside the tax system.

Income tax changes

The government is proposing a number of changes to income tax, with amendments to almost every threshold in the current tax brackets over a number of years. These proposed changes are summarised in the table below:

Income tax rate (%)

Current tax thresholds Income range ($)

New tax thresholds
from 1 July 2018
Income range ($)

New tax thresholds
from 1 July 2022
Income range ($)

New tax thresholds
from 1 July 2024
Income range ($)

Tax-free0 – 18,2000 – 18,2000 – 18,2000 – 18,200
1918,201 – 37,00018,201 – 37,00018,201 – 41,00018,201 – 41,000
>32.537,001 – 87,00037,001 – 90,00041,001 – 120,00041,001 – 200,000
3787,001 – 180,00090,001 – 180,000120,001 – 180,000

45

> 180,000> 180,000> 180,000> 200,000

 

Please note: These proposed measures are subject to passing legislation.