On Tuesday 2 April, the Federal Government handed down its Budget for the 2019-20 financial year. This is the first Budget delivered by Treasurer Josh Frydenberg and will be the final Budget before the next Federal Election.

The theme of this year’s Budget is ‘A stronger economy and a secure future’. According to the Treasurer, the measures in this year’s Budget will not only lower personal taxes and return the Budget to surplus, they also help older Australians continue contributing to super and provide tax breaks for small-to-medium businesses.

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. Additionally, if there is a change of Government at the Federal Election, these proposals may be changed or removed from the next and subsequent Budgets.

Keypoints

 Tax changes

• Immediate tax cuts for low-to-middle income earners
• Extension to the personal income tax cuts that were announced in last year’s Budget
• Increase to the Medicare Levy low-income threshold

Superannuation adjustments

• No work test for voluntary contributions by people aged up to 66
• Bring-forward rule extended to people up to 66
• Spouse contributions extended to people aged up to 74

 Social security, health and aged care

• One-off Energy Assistance Payment for social security pension recipients
• Increased access to diagnostic imaging and higher Medicare rebates
• Funding for 10,000 extra home care packages and 13,500 residential care places
• Extension of Commonwealth Home Support Programme

How will this affect you?

Tax changes

• Immediate tax cuts for low-to-middle income earners
  The Low and Middle Income Tax Offset (LMITO) was introduced in last year’s Budget as an addition to the Low Income Tax Offset (LITO). The LMITO will increase for individuals and families, starting from the current financial year, with eligible low-to-middle income earners receiving a payment after submitting their tax return.The base rate for the LMITO will increase from $200 to $255 and the maximum payment will increase from $530 to $1,080.From 1 July 2022, both offsets will be replaced by a single low-income tax offset.

What this could mean for you
If you are eligible to receive the Low and Middle Income Tax Offset, you can expect to receive a payment amount after you submit your next tax return.

• Extension to personal income tax cuts
  Over the next five years, many Australians will receive a decrease to their income tax rate in one of three ways:

1. The upper threshold for the 19% marginal tax rate will increase from $37,000 to $45,000.
2. The 32.5% marginal tax rate will reduce to 30%.
3. The 37% marginal tax rate will be abolished (this change has already been legislated).

These changes will be progressively rolled out between now and 1 July 2024.

What this could mean for you
These measures are intended to ease the cost of living by reducing the income tax rate for many Australians, to varying degrees. The Government estimates that 94% of tax-paying Australians will pay 30% tax or less from 1 July 2024.

• Increasing the Medicare Levy low-income threshold
  The Government will increase the Medicare Levy low-income thresholds for singles, families, and seniors and pensioners from the 2018-19 income year.

What this could mean for you
You won’t be charged the Medicare Levy if your taxable income is below the following thresholds:

Superannuation adjustments

• No work test for voluntary contributions by people aged up to 66
  The Government will update the superannuation contribtuion rules to allow people aged 65 and 66 to make voluntary contributions to superannuation without meeting the work test. Voluntary contributions include after‑tax (non-concessional) contributions, tax-deductible (concessional) contributions, voluntary employer contributions and spouse contributions.

 What this could mean for you
If you are aged 65–74, current rules only allow you to make voluntary superannuation contributions if you have been gainfully employed for 40 hours over 30 consecutive days during the financial year or qualify for a new work test exemption taking effect from 1 July this year. With the Age Pension age scheduled to increase to 67 from 1 July 2023, this change effectively allows individuals to continue making voluntary super contributions until Age Pension age, whether they are still working or not.

• Bring-forward rule extended to people up to 66
  The Government will update the superannuation contribution rules to allow people aged under 67 to make three years’ worth of after-tax (non-concessional) contributions in a single year. Under current contribution caps, that would enable under-67-year-olds to contribute up to $300,000 in one year.

What this could mean for you
Currently, you must be under 65 during a financial year to use the bring-forward rule. This change enables 66 and 67 year olds to boost their super in preparation for retirement, provided they meet other eligibility criteria. In particular, you can only make non-concessional contributions if your total super balance on 30 June, before the financial year when you make the contribution, is under $1.6 million.

• Spouse contributions extended to people aged up to 74

Under the proposed changes, individuals will be able to contribute to their spouse’s superannuation where the receiving spouse is under age 75. In addition, if the receiving spouse is aged 65 or 66, they will no longer need to meet a work test. The work test will continue to apply if the receiving spouse is aged 67 or over.

What this could mean for you
Currently, for you to make a spouse contribution, your spouse must be under age 70 at the time of the contribution, and must meet the work test if they are aged between 65 and 69. This change enables you to make spouse contributions for a further five years, giving you more opportunities to equalise your superannuation balances while potentially claiming a tax offset.

Business

• Instant asset write-off
  Following the Government’s announcement on 29 January 2019 to increase the instant asset write-off threshold to $25,000 and extend the eligible purchase period to 30 June 2020, this Budget announcement increases the threshold even further to apply to assets costing less than $30,000, while retaining the 30 June 2020 deadline.

What this could mean for you
While the deduction measure was previously limited to small businesses (being those businesses with an aggregated annual turnover of less than $10 million), it will soon extend to “medium-sized business” with an aggregated turnover of less than $50 million. This means all businesses with an aggregated turnover of less than $50 million will be able to obtain an immediate deduction for eligible assets costing less than $30,000 that are first used, or installed ready-for-use, from Budget night to 30 June 2020.

We note that the instant asset write-off for medium-sized businesses will only apply to assets that were acquired after 2 April 2019 and will not apply to assets acquired before this date (even where they are first used or installed ready for use after Budget night).

Given the announcements made on 29 January 2019, there are effectively three different thresholds that will apply for purchases made during the 2019 financial year. In summary, the immediate deduction will be available in respect of assets that cost:

• up to $20,000, purchased from 1 July 2018 to 28 January 2019 (for small business)
• up to $25,000, purchased from 29 January 2019 to 2 April 2019 (for small business)
• up to $30,000, purchased from 2 April 2019 to 30 June 2020 (for both small and medium-sized business)

The Budget announcement makes it clear that the existing small business tax depreciation concessions, including the pooling rules, will continue to apply to those businesses with aggregated turnover of less than $10 million, and will not be extended to medium sized businesses.

The expansion of the instant asset write-off to medium-sized businesses is a positive outcome for those businesses otherwise overlooked in this year’s budget. This measure will help to provide moderate cash flow benefits to an estimated 22,000 additional businesses.

• Export Market Development Grant (EMDG)
  The Government announced that it will provide additional funding of $60 million to the EMDG scheme over a three-year period to support small and medium enterprises (SMEs) that export Australian goods and services to overseas markets.

What this could mean for you
The EMDG is currently available to Australian exporters who have income of less than $50 million and who promote their products to international customers. The objective of the EMDG is to reimburse eligible entities up to 50% of their promotional expenses (i.e. advertising, marketing, overseas travel to trade shows) incurred above $15,000. The minimum grant entitlement is $5,000 and the maximum is $150,000 per annum.

Whilst not significant, the additional funding will assist those Australian small business entities looking to build and expand their brand overseas.

Social security, health and aged care

• One-off Energy Assistance Payment for social security pension recipients
  Social security pension recipients will receive a one-off Energy Assistance Payment to help with increased power bills. The payment will be $75 for singles and $125 for couples, and will be exempt from income tax.

What this could mean for you
If you receive an Age Pension, Disability Support Pension, Carer Payment, Parenting Payment Single, or certain payments from the Department of Veterans Affairs, such as the Service Pension or War Widow(er)s Pension, you could be eligible for a one-off payment by the end of the 2020 financial year.

• Increased access to diagnostic imaging and higher Medicare rebates
  The Government will provide $309 million to improve access to diagnostic imaging, with $199 million provided to increase patient rebates for items on the Medicare Benefits Schedule (MBS) from 1 July 2020. Additionally, the Government has allocated $187 million to increasing patient rebates for 119 General Practitioner service items.

What this could mean for you
For patients, these measures could help to make medical services more accessible and affordable, with fewer out-of-pocket costs. For medical practitioners and imaging providers, they provide an end to the rebate freeze originally introduced in 2013 and extended in 2016.

• Funding for 10,000 extra home care packages and 13,500 residential care places
  The Government will provide $724.8 million over five years from 2018-19 to fund improvements in residential and home care services, including a one-off increase to the basic subsidy for residential aged care recipients, 13,500 additional residential aged care places, and 10,000 additional home care packages.

What this could mean for you
These measures continue efforts in recent Budgets to reduce waiting times for both home care packages and residential care places, as well as subsidising the cost of providing residential care. As at 31 December 2018, around 74,000 Australians were in the queue for a home care package, down from more than 100,000 a year before. If you or a family member are in this situation, these measures could help provide more choice and enable you to access services sooner.

• Extention of Commonwealth Home Support Program
  The Government will provide $5.9 billion to extend funding for the Commonwealth Home Support Program (CHSP) until 30 June 2022. Funding is currently due to cease on 30 June 2020.

What this could mean for you
The CHSP contributes to essential home support services, including Meals on Wheels, personal care, nursing, domestic help, home maintenance, and community transport. If you or a family member rely on these services to continue living independently, this funding extension will provide further support over the next few years.

We’re here to help!

Speak to us if you’d like to understand more about how the Federal Budget announcement might impact your situation.

Important information: This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. This document has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non‑guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Count Wealth Accountants® is the business name of Count. Count advisers are authorised representatives of Count. Information in this document is based on both current and proposed regulatory requirements and laws as at 3 April 2019, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document. Count is registered with the Tax Practitioners Board as a Registered Tax (Financial) Adviser. However your authorised representative may not be a Registered Tax Agent. Consequently, tax considerations are general in nature and do not include an assessment of your overall tax position. You should seek tax advice from a Registered Tax Agent.