The 2018-19 federal budget was handed down last night by the Honourable Scott Morrison MP.
Being a pre-election budget, the government has looked at whatever capacity it has to win some easy votes and distinguish itself from the Opposition. Focusing primarily on the low to medium income earners with tax cuts.
Government commentators have indicated, they believe that they have focused their budget toward this demographic as these are the people who will return them back to power at the next election.
Political gains aside, lets take a look at the high level budget.
Plan for a stronger economy
- Provide tax relief to encourage and reward working Australians and reduce cost pressures on households, including lowering electricity prices,
- Keep backing business to invest and create more jobs, especially small and medium sized businesses,
- Guarantee the essential services that Australians rely on, like Medicare, hospitals, schools and caring for older Australians,
- Keep Australians safe, with new investments to secure our borders, and, as always,
- Ensure that the Government lives within its means, keeping spending and taxes under control.
Budget overview
Tax relief to encourage and reward working Australians
- Seven–year personal income tax plan for lower, fairer and simpler taxes
- Immediate relief for low and middle income earners
- Tackling bracket creep
- Helping families with cost of living pressures
- Simplifying the personal tax system by abolishing the 37 per cent tax bracket
- No increase in the Medicare Levy because a stronger economy delivers stronger revenue
Keep backing business to invest and create more jobs
- Legislating lower taxes for Australian businesses
- Extending the $20,000 instant asset write‒off
- $75 billion for transport infrastructure
- Building a stronger and smarter economy
- A 21st century Medical Industry Growth Plan
- Supporting Australia’s international competitiveness and exports in agriculture and the defence industry
Guaranteeing the essential services that Australians rely on
- Supporting more choices for a longer life
- Continuing to guarantee the Medicare Benefits Schedule
- Backing the Gonski Review
- Record funding for a new hospital agreement
- Fully funding the National Disability Insurance Scheme
- Lower energy bills and more investment to keep the lights on
Keeping Australians Safe
- Strengthening airport security
- Managing biosecurity risks to protect our environment, exports and agricultural and tourism sectors
- Improving the national security architecture
- Continuing Operation Sovereign Borders to combat the threat of people smugglers
Ensuring that the Government lives within its means
- Disciplined fiscal management and tax and welfare integrity
- Maintaining the trajectory to projected surplus in 2020‒21
- No longer borrowing for recurrent expenditure
- Limiting payments growth to 1.6 per cent
- Ensuring multinationals pay their fair share of tax
- Tackling the black economy
So how does this relate in layman's terms?
1. Cash refunds on excess dividend imputation credits
In contrast to Labor’s divisive proposal, Mr Morrison said the government opposes “unfair tax grabs on retirees and pensioners” and the cash refund arrangement for excess dividend imputation credits will not be changed.
2. Pension Loans Scheme opened to all older Australians
Mr Morrison said the scheme will be available to all older Australians, including full rate pensioners and self-funded retirees, “so they can boost their retirement income by up to $17,800 for a couple, without impacting on their eligibility for the pension or other benefits”.
This will be the case from 1 July 2019.
The scheme allows older Australians to unlock the equity within their homes without impacting their benefits.
For single pensioners, this could mean a boost of up to $11,000. For couples, the benefit could be as much as $17,000.
3. Pension Work Bonus
Pensioners in paid work will now be able to earn up to an extra $1,300 a year before seeing any impact on their pension.
Self-employed pensioners will for the first time have the ability to earn up to an extra $7,800 a year.
As it stands, pensioners can earn up to $250 a fortnight without impacting pension eligibility. This change will see that figure increased to $300.
4. Superannuation Work Test exemption
As it stands, Australians between 65 and 74 need to work at least 40 hours over a 30-day period in the financial year in order to make contributions to superannuation.
However, as of 1 July 2019, these Australians – provided they have super balances of less than $300,000 will be able to make contributions for 12 months from the end of the financial year in which they last passed the work test.
5. Retirement income covenant
Superanuation fund trustees will be required to develop strategies to assist members in achieving their retirement income objectives.
“This will focus the industry on providing a higher standard of living for retirees,” budget documents predict.
6. Restart wage subsidies
Access to this subsidy for Australians 50 and over will be expanded, with businesses given financial incentives of up to $10,000 to hire mature-age employees.
Mr Morrison hopes this measure will address age discrimination in the workforce. It’s costed at $1.1 million.
7. Skills Checkpoint for older workers
According to budget documents, this checkpoint will help older workers with advice on the skills and training needed in building their careers or transitioning to new jobs and industries.
These checkpoints will be at ages 45 and 65 and will measure their skills, health and finances.
8. Superannuation exit fees banned, charges capped
Exit fees charged upon changing funds will be banned as of 1 July 2019 and passive fees charged on accounts with balances of less than $6,000 will also be capped at 3 per cent.
9. Super reunification
In a move estimated to see $6 billion returned to three million super fund members by 2020, the Australian Taxation Office will have increased abilities to “proactively” find and send lost superannuation to members and their accounts.
Accounts which haven’t been touched for at least 13 months will see monies below $6,000 transferred to the ATO which will then use data-matching to find the saver’s active account. This program will begin from 1 July 2019.
10. Opt-in to life insurance
Super funds will no longer be able to force Australians younger than 25 to pay for life insurance policies.
11. Home care places
As predicted, the government is set to increase the number of home care places by 14,000. This increase will come at a cost of $1.6 billion and will take four years.
Mr Morrison said: “By 2021-22, over 74,000 high level home care places will be available, an increase of 86 per cent on 2017-18.
“We will also be providing $146 million to improve access to aged care services in rural, regional and remote Australia.”
12. Funding to improve aged care services
The My Aged Care website will receive a $61.7 million boost and $14.8 million will also be used to “streamline the assessment process for aged care services”.
$22 million will be dedicated to fighting elder abuse, with plans to trial specialist elder abuse support services.
As it stands, aged care services spending sits at $66.7 billion this year. This will hit $77 billion by 2012-22.
13. Personal income tax cuts
The government predicts more than 10 million Australians will receive a $530 benefit thanks to tax cuts targeted at low and middle income workers.
Australians with taxable incomes of up to $37,000 will see up-to an extra $200 tax offset.
Those earning between $37,001 and $47,999 will see reductions of up to $530.
Those earning between $48,000 and $90,000 will also see an offset of $530.
The Honourable Scott Morrison MP has said that by 2019-2020 we will be back in surplus. All in all, compared to previous years budget, this one is fairly timid. Changes are minimal and impacts and legislative changes minimal. If you have any questions about anything in the budget, please contact our office.
