2019 Federal Budget overview: Super, tax and related announcements

On 2 April 2019, Josh Frydenberg announced his first Federal Budget as Treasurer.

The coalition’s key message was that they had returned Australia’s Budget to surplus (or rather will do from next financial year) through responsible Budget management. The Treasurer presented measures to further strengthen the economy (for example, spending on infrastructure and equipping more workers with skills) and somewhat inevitably in an election year, offered up generous tax cuts for both individuals and small businesses.

There were only a handful of policies that directly relate to superannuation, most of which make it easier for older Australians to make super contributions.

There were some other announcements that will benefit older Australians through a one-off energy payment, extending the age that super contributions can be made, and expanding support for care.

The Treasurer pledged some measures that should filter through to all Australians, confirming again that the government will support all 76 recommendations from the Royal Commission, as well as significantly increase the funding for both the APRA and ASIC to police those recommendations.

It’s important to remember that with a federal election looming, some of these policies may never see the light of day. Shadow Treasurer Chris Bowen told the ABC that if Labor win the election they will issue a new budget before next May, “in the third quarter of (this) year”.

The main announcements affecting tax, superannuation and older Australians are outlined below.

See also Penny Pryor’s take on the Federal Budget Economic Outlook and our coverage of Bill Shorten’s Budget reply.

Income tax cuts

The government announced an expansion (or “enhancement”) of the Personal Income Tax Plan tax relief announced by Scott Morrison in last year’s Federal Budget.

An immediate increase in the Low and Middle Income Tax Offset (LMITO)

The new Low and Middle Income Tax Offset (LMITO) will increase from this financial year to a new maximum of $1,080 (from $530). The base amount will increase from $200 to $255 for 2018/2019 and for the next three income years.

Treasury predicts that the LMITO increase will assist over 10 million Australians, with about 4.5 million taxpayers with taxable incomes between $48,000 and $90,000 receiving the full $1,080 reduction in tax for 2018-19.

Around 2.3 million Australians with taxable incomes less than $37,000 will receive an offset of up to $255. Learn more about how LMITO works.

An increase in the low income tax threshold (LITO)

The low income tax threshold (LITO) will increase from $645 to $700 from the 2022-23 financial year. Learn more about how LITO works.

An increase in the top threshold for the 19% tax bracket

The top threshold of the 19% tax bracket will increase from $41,000 to $45,000 from the 2022-23 financial year. Treasury estimates this will stop around 590,000 taxpayers from entering the 32.5% tax bracket in 2022-23. Find out more about the income tax cuts announced in last year’s Budget.

A reduction in the 32.5% tax bracket to 30%

Last year Scott Morrison announced the abolition of the 37% tax bracket, thereby expanding the 32.5% tax bracket for taxable incomes between $45,000 and $200,000. In this year’s Federal Budget, Josh Frydenberg announced that this tax bracket will be reduced from 32.5% to 30% from the 2024-25 financial year. It’s projected that 94% of taxpayers will face a marginal tax rate no higher than 30% from then.

The Treasurer acknowledged that Australia currently has relatively high rates of tax compared with other countries. Australia’s top marginal tax rate cuts in at around 2.2 times average full-time earnings, compared with 4 times in Canada and the UK, and 8 times in the US.

The following table illustrates how the income tax rates are scheduled to change over the coming years.

Tax rate	2017-18	2018-19 to 2021-22	2022-23 to 2023-24
0% (tax-free)	$0 – $18,200	$0 – $18,200	$0 – $18,200
19%	$18,201 – $37,000	$18,201 – $37,000	$18,201 – $45,000
32.5%	$37,001 – $87,000	$37,001 – $90,000	$45,001 – $120,000
37%	$87,001 – $180,000	$90,001 – $180,000	$120,001 – $180,000
45%	Over $180,000	Over $180,000	Over $180,000
LMITO	N/A	Up to $1,080	N/A
LITO	Up to $445	Up to $445	Up to $700

The table below provides income tax rates from 2024-25 onwards.

Tax rate	From 2024-25
0% (tax-free)	$0 – $18,200
19%	$18,201 – $45,000
30%	$45,001 – $200,000
45%	Over $200,000
LITO	Up to $700

The following table shows the cumulative tax relief for various income levels for future financial years.

Taxable income	$30,000	$50,000	$80,000	$90,000	$120,000	$140,000	$160,000	$200,000
2018/2019	$255	$1,080	$1,080	$1,215	$315	$135	$135	$135
2019-2020	$510	$2,160	$2,160	$2,430	$630	$270	$270	$270
2020/2021	$765	$3,240	$3,240	$3,645	$945	$405	$405	$405
2021/2022	$1,020	$4,320	$4,320	$4,860	$1,260	$540	$540	$540
2022/2023	$1,275	$5,400	$5,400	$6,075	$3,825	$3,105	$3,105	$3,105
2023/2024	$1,530	$6,480	$6,480	$7,290	$6,390	$5,670	$5,670	$5,670
2024/2025	$1,785	$7,685	$8,435	$9,630	$10,830	$11,510	$12,910	$17,310

Tax boosts for small and medium-sized businesses were also announced, including a tax rate reduction from 27.5% to 25% (from 2021-22), and an immediate increase in the instant asset write-off from $25,000 to $30,000.

Superannuation policies

Relaxing restrictions on superannuation contributions for older Australians

There were a trio of measures announced that help older Australians looking to make super contributions from the 2020-21 year, (that is from 1 July 2020).

1. Australians aged 65 and 66 will be allowed to make voluntary superannuation contributions (both concessional and non-concessional) without meeting the work test. Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they self-report as working a minimum of 40 hours over a 30-day period in the relevant financial year. The objective is to align the work test with the eligibility age for the Age Pension (scheduled to reach 67 from 1 July 2023). Learn how the work test works.

1. Those aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule. Currently you cannot access bring-forward arrangements when you’re aged over 65. Learn how the bring-forward rule works.
2. Those aged up to and including 74 will be able to receive spouse contributions. Currently you cannot receive spouse contributions when you’re aged 70 and over. Learn more about spouse contributions.

Read why Sean Corbett believes these new incentives are disingenuous of the Liberals.

Simplifying ECPI calculations

There could be one less headache (and reduced costs) for SMSFs thanks to simplifying the calculation of exempt current pension income (ECPI).

From 1 July 2020 trustees with interests in both the accumulation and retirement phases during an income year will be allowed to choose their preferred method of calculating ECPI. This will also mean super funds don’t need to obtain an actuarial certificate when calculating ECPI using the proportionate method, where all members of the fund are fully in the retirement phase for all of the income year.

Expansion and delay of SuperStream Rollover Standard

The ATO will receive $19 million to facilitate the inclusion of superannuation release authorities by electronic request. This will involve expanding the electronic SuperStream Rollover Standard used for the transfer of information and money between employers, superannuation funds and the ATO. To coincide with this the start date for SMSF rollovers in SuperStream will be delayed until 31st March 2021.

Superannuation Consumer Advocate

The Government will provide $100,000 to undertake an expression of interest process to identify options to support the establishment of a Superannuation Consumer Advocate. The Advocate would represent consumers in policy discussions and provide information to educate and help Australians to navigate the super system.

Protecting your super package amendments

The Government announced minor amendments to the Protecting Your Super Package announced in last year’s Budget. This Package is designed to reduce the erosion of low-balance accounts by fees and insurance. The amendments are not all positive and the delays suggest there are issues with implementation within last year’s projected timeframe.

The measures announced include:

• extending to 16 months (from 13 months) the period after which an account that has not received any contribution is considered inactive,
• expanding the definition of when an account is considered active before consolidation by the ATO, and
• requiring the ATO to consolidate to an active account (where possible) within 28 days of receipt.

Learn the easiest way to find and consolidate your super.

The Government is also delaying the start date to 1 October 2019 (from 1 July 2019) for ensuring insurance within superannuation is only offered on an opt-in basis for:

• accounts with balances of less than $6,000, and
• for new accounts belonging to members under the age of 25 years.

Learn more about insurance in super.

Encouraging super fund mergers

The current tax relief for merging superannuation funds (due to expire on 1 July 2020) will be made permanent. Since December 2008, tax relief has been available for superannuation funds to transfer revenue and capital losses to a new merged fund, and to defer taxation consequences on gains and losses from revenue and capital assets.

Restoring trust in the financial system

The Government has previously said they will adopt all 76 recommendations of the Financial Services Royal Commission. As part of that they have pledged to beef up the industry’s regulators (APRA and ASIC) so that they have the resources “to deliver on their new responsibilities and new enforcement and supervision approach”.

Side note: The Productivity Commission handed in their report on their Inquiry into Superannuation earlier this year. At the time Josh Frydenberg said he would wait until the Financial Services Royal Commission report was received before he would confirm what Productivity Commission recommendations the Government would act on. Both the Government and the Opposition have been quick to adopt all the recommendations from the Royal Commission, but there is still no word on their view on the Productivity Commission’s recommendations.

Learn more about the Productivity Commission’s findings and recommendations in the following SuperGuide articles:

• Super’s next shake up? Productivity Commission gets tough
• Key issues and findings raised by the PC report on superannuation
• Modernising the super system: Recommendations from the PC report on superannuation

Additional funding for ASIC, APRA and their own regulator

ASIC will get additional funding of $405 million so that it can carry out “an accelerated enforcement strategy”, implement an enhanced onsite supervisory capability for large institutions, and deliver on its expanded role in relation to superannuation (as recommended by the Royal Commission).

APRA’s budget will be increased by $152 million to strengthen its supervisory and enforcement activities, including in relation to governance, culture and remuneration, as well as to enhance their regulation of superannuation funds.

The Government will also establish a new Financial Regulator Oversight Authority as recommended by the Royal Commission to assess ASIC’s and APRA’s effectiveness on an ongoing basis.

Measures for older Australians

Energy Assistance Payment

The Treasurer announced a one-off income tax exempt payment of $75 for singles and $125 for couples. The payments are to assist with “power bills and cost of living pressure” and will be made to recipients of the Age Pension, Disability Support Pension, Carer Payment, Parenting Payment Single, Veterans’ Service Payment, Veterans’ Income Support Supplement, Veterans’ Disability Payments, War Widow(er)s Pension or Permanent Impairment Payments who are residing in Australia as at 2 April 2019.

The date that the payments will be made has not been confirmed, but is expected to be made this financial year. However, that is dependent on the legislation passing parliament, and with the election due to be announced soon there are very few sitting days of parliament available. So don’t go spending it just yet.

Additional funds for aged care

The Federal Government has pledged $282 million for an additional 10,000 “home care” packages and increasing home care supplements for dementia and cognition. The Treasurer also announced a $320 million general subsidy boost in 2018-19 and 13,500 new places across Australia. Support for carers is being expanded with an additional $84 million for the Integrated Carer Support Service.

Improving access to medicines and treatments

The Treasurer announced a number of measures aimed at improving healthcare, including reducing out-of-pocket expenses, making medicines more affordable and improving access to medicines and support for community pharmacies. New services will also be added to the Medicare Benefits Schedule including heart health checks, and over $737 million is being allocated to mental health programs.

Learn more in the article Budget 2019 boosts aged care and mental health, and modernises Medicare: Health experts respond.