Last night the Treasurer delivered his first budget, which lays the way for a Federal Election on 2 July.
This year we have split our Federal Budget update into two parts, part one below for individuals and families and part two for businesses. To read more about the announcements for business you can read part two here.
Because it sets the tone for this budget, it is important to note that none of the measures announced in this budget are likely to be legislated before the election. Our commentary has been written on the basis that the announcements will be implemented, but it should be noted that there is a chance that the Turnbull Government may not get all legislation passed (either by not being re-elected or having legislation rejected by the Senate).
The key announcements that will impact individuals and families are:
- An increase to the threshold for the 32.5% tax bracket from $80,000 to $87,000 from 1 July 2016.
- The concessional (deductible) superannuation contribution limit will be reduced to $25,000 (from $30,000 or $35,000) from 1 July 2017.
- From 1 July 2017, all individuals up to age 75 will be allowed to claim an income tax deduction for personal superannuation contributions.
- The 2% temporary budget deficit levy on incomes over $180,000 will expire at the end of the 2016 financial year.
- GST will be extended to all low value goods imported by consumers from 1 July 2017.
- The low-income thresholds for the Medicare levy will increase in line with CPI.
- The pause in the indexation of the income thresholds for the Medicare levy surcharge and the private health insurance rebate will continue for a further three years from 1 July 2018.
A number of additional changes to superannuation were announced in the budget. We have provided a summary of the announcements below, however we recommend that you speak to your financial planner to discuss how these changes might impact on your circumstances:
- The tax exemption on earning of assets supporting Transition to Retirement Income Streams will be removed from 1 July 2017.
- The threshold at which high income earners pay additional contributions tax will be lowered to $250,000 from 1 July 2017.
- A lifetime non-concessional contributions cap of $500,000 will be introduced, replacing the annual non-concessional contribution cap.
- Restrictions on people aged 65 to 74 from making superannuation contributions for the retirement will be removed from 1 July 2016.
- The current Low Income Superannuation Contributions scheme will be replaced by the Low Income Superannuation Tax Offset for individuals earning less than $37,000.
- All individuals up to age 75 will be able to claim a tax deduction for personal superannuation contributions, rather than forcing employees to salary sacrifice per the current arrangements. This change will commence from 1 July 2017.
- A balance cap of $1.6m on the total amount of accumulated superannuation an individual can transfer into the tax-free retirement phase will be introduced from 1 July 2017.
- From 1 July 2017, individuals with a superannuation balance less than $500,000 will be allowed make catch-up concessional superannuation contributions where they have not reached their concessional contributions cap in previous years.
We will follow the measures that impact our clients and are available for any questions regarding the ever changing Australian taxation environment.
If you would like additional detail on any of the budget measures announced last night, including how they may impact on your circumstances, please contact us on 07 5613 2620 or book an appointment today.