In this "election" Budget, the Government has played a relatively safe hand. There were no big surprises from a financial planning point of view. The anticipated personal income tax cuts were handed down as was the small business instant asset write-off extension. Thankfully, changes to superannuation were also kept to a minimum.
Personal Income Tax Cuts
The Government made some changes to its 7-Year Personal Income Tax Plan introduced last year. Specifically, the low to middle income tax offset (LMITO) will effectively double which means singles could receive up to $1,080 instead of $530, and couples up to $2160.
Additionally, the low income tax offset (LITO) will increase to $700 from the 2022/23 financial year. It was previously due to increase to $645 from this time.
Also in 2022/23 year the 19% tax threshold will increase to $45,000 instead of $41,000 per the original plan, and the 32.5% threshold will increase to $120,000.
In 2024/25 year the 32.5% tax rate is proposed to reduce to 30%.
The instant asset write-off for small businesses continues to be the gift that keeps on giving. The $20,000 limit was recently increased to $25,000. The Government has now announced a further increase to $30,000 to 30 June 2020 and will also extend access to medium-sized businesses with annual turnover of up to $50 million.
Superannuation changes were thankfully kept to a minimum. Retirees who are 65 and 66 years of age will be able to contribute to super without meeting the 40hr work test from 1 July 2020. This aligns superannuation contribution eligibility rules with the eligibility age for the age pension, which is due to increase to 67 years of age from 1 July 2023. To ensure continuity with current contribution rules and limits, individuals aged 65 and 66 at that time will also be able to utilise the 3-year bring forward limit of $300,000 for non-concessional contributions.
The spouse superannuation contribution age limit will also be extended from age 69 to age 74.
All in all, this was very much an Election Budget – light-weight but an attempt to target the areas the Government hopes Australians will react positively to. It's a tall order but the proof will be in the pudding following the Federal election result in May this year.
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