According to the Treasurer, this year’s Budget measures aim to create job opportunities and help Australians get back on track. The Treasurer claims that these measures will get the economy growing again by 2021. Here are some of the announced Budget changes that could affect you. However, it’s important to remember that these are only proposals at this stage, and each proposal will only become law once it’s passed by Parliament.
Taxation
Personal tax cuts - The Government has announced that it will bring forward stage two of the previously legislated tax cuts that were due to take effect from 1 July 2022 by two years. As a result, from 1 July 2020:
• the Low Income Tax Offset (LITO) will increase from $445 to $700. The increased LITO will be reduced at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000. The LITO will then be reduced at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
• the top threshold of the 19% tax rate will increase from $37,000 to $45,000, and
• the top threshold of the 32.5% tax rate will increase from $90,000 to $120,000.
What this could mean for you - The following chart shows the tax cuts you might receive this financial year based on your income levels and the amount of tax you’re currently paying.
However, if you’re earning between $48,000 and $90,000, these tax cuts will cease to apply from 1 July 2021 due to the Low and Middle Income Tax Offset (LMITO) being phased out from that date. Other individuals earning below $126,000 will also be impacted (to a lesser extent) by the removal of LMITO from 1 July 2021. We’ve provided more information about this in the next section. It should be noted that the Government made no announcements about bringing forward the effective date of the stage three tax cuts that were due to take effect from 1 July 2024. Under these tax cuts, the 37% tax rate will be abolished and the 32.5% tax rate will reduce to 30% and will apply from $45,000 to $200,000.
Super Changes
Default super accounts - Currently, if you start a new job and you don’t let your employer know where you want them to pay your super contributions, they will open a super account for you. The account will be in your employer’s default super fund. This may result in you having multiple super accounts. By 1 July 2021, your employer will be able to obtain information about your existing super account from the ATO. They will then pay your super contributions into this account, unless you instruct them to pay it to a different account. For people who don’t yet have a super account, their employer will be able to open an account for them in their default super fund.
What this could mean for you - Over 4 million Australians currently have multiple super accounts, and this means they’re paying more than one set of super fees and possibly multiple insurance premiums as well. The Government estimates that this is costing Australians $450 million each year. The intention of this change is to keep people’s super accounts attached to them, so they can take them from job to job. By having only one super account, you can stop paying unnecessary fees and insurance premiums that may be eroding your super balance. Having all your super together can also help your super savings accumulate faster.
Health, welfare and jobs
Additional support payments for welfare recipients - Government support recipients will receive two separate economic support payments of $250, to be paid progressively from December 2020 and March 2021. This follows two previous payments of $750 to eligible recipients, with the new payments estimated to cost a total of $2.6 billion
What this could mean for you - You may be eligible for the two payments of $250 if you’re currently receiving:
• Age Pension (including Age Pension (Blind))
• Carer Allowance*
• Carer Payment
• Commonwealth Seniors Health Card
• Disability Support Pension (including Disability Support Pension (Blind))
• Double Orphan Pension*
• DVA Gold card
• DVA Payments
• DVA Seniors Card
• Family Tax Benefit (fortnightly recipients)*
• Family Tax Benefit (lump sum recipients)*
• Pensioner Concession Card (PCC) holders (covers non income and asset test PCC holders and people who have an extended entitlement to a PCC even though their payment has stopped).
Health services - Coronavirus has taken its toll on the mental health of many Australians. Therefore, the number of psychological services funded by Medicare will be doubled from 10 to 20, effective immediately. The NDIS will also receive additional funding of almost $4 billion, to provide essential support to Australians living with a disability. Women facing ovarian cancer will now be able to access the drug Lynparza through the PBS. Rather than costing $140,000 per course, general patients will now pay around $41 for a script while concession card holders will be charged $6.60.
What this could mean for you - If you currently access any of these services, or think you may need to in the future, it’s important to understand what you’re eligible for. As the first step, we recommend you speak with your doctor.
If you would like to discuss exactly how the new measures may affect you or your family please feel free to contact us.