Taxation and Superannuation Policies

The 2019 Federal Election took place on Saturday 18 May. With the Coalition reelected we have compiled a list of Taxation and Superannuation Policies that the Morrison Government plan to implement.

Personal income tax cuts
  • Phase 1: From 1 July 2022, the top threshold of the 19% personal income tax bracket will increase from $41,000.00 to $45,000.00
  • Phase 2: From 1 July 2024, the 32.5% marginal tax rate will be reduced to 30%;
  • Phase 3: From 1 July 2024, the 37% bracket will be abolished
Low- and middle-income tax offset

Low-and-middle-income earners will receive immediate additional tax relief by more than doubling the low- and middle-income tax offset.

  • Phase 1 (LMITO): The value of the offset in relation to workers earning between $37,000.00 and $48,000.00 P.A. will increase up to the maximum benefit of up to $1,080.00
  • Phase 2: From 1 July 2022, the LITO will increase from $645.00 to $700.00. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500.00 and $45,000.00. The LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000.00 and $66,667.00.

The increase to the top threshold of the 19% personal income tax bracket and the changes to LITO will lock in the reduction in tax provided by the LMITO when the LMITO is removed.

Increase Medicare levy low-income threshold

Low-income taxpayers will continue to be exempt from paying the Medicare Levy.

Fast track lower taxes for small business

Corporate tax rate for small and medium businesses will be reduced further from 27.5% to 25% by 2021-22 benefiting around 970,000 companies.

Unincorporated businesses with a turnover of less than $50 million, will receive an increase in their tax discount rate to 16%.

ABN Holder Requirements

From 1 July 2021. ABN holders with an income tax return obligation will be required to lodge their income tax return, and from 1 July 2022 ABN holders will be required to confirm the accuracy of their details on the Australian Business Register annually.

Division 7A changes delayed

The commencement date to Div 7A will be delayed by 12 months to 1 July 2020. The proposed amendments announced in the 2016 and 2018 proposed budgets will further be reviewed with stakeholders following responses to Treasury on its Consultation Paper.

Helping Australians buy their first home

The scheme will enable first home buyers to purchase a house with a deposit as low as 5%. The scheme will commence on 1 January 2020, first home buyers with an income of up to $125,000.00 annually or $200,000.00 for a couple will be eligible.

Improving flexibility of the superannuation system

Members of regulated superannuation funds do not have any restrictions in making voluntary contributions prior to reaching 65 years of age. From 1 July 2020, the age limit will be increased and allow 65 and 66 year old’s to contribute even if they do not meet the current work test requirement.

Additional flexibility relating to restriction to an individual claiming a spouse contribution tax offset are proposed to implemented from 1 July 2020. Spouses aged between 70 to 74 will be eligible if they meet the work test. Spouses aged between 65 and 66 will not be required to meet the work test at all.

Superannuation election policies
  • Extend the maximum size of a self-managed superannuation fund from 4 to 6 members;
  • Expand pension loans scheme to provide around 1.8 million Australians the option to draw down on more of the equity in their own home;
  • Allow contributions to superannuation from the proceeds of downsizing: this will be capped at $300,000.00 for eligible Australians aged 65 and over;
  • Continue to allow self-managed superannuation funds to borrow on a non-recourse basis.
Superannuation- other measures
  • Superannuation fund trustees will be allowed to calculate exempt current pension income on a preferred method basis from 1 July 2020;
  • Permanent tax relief from 1 July 2020 for qualifying superannuation funds that have merged;
  • SuperStream will be expanded to include the transfer of information and money between employers, superannuation funds and the ATO, with an effective date from 31 March 2021;
  • An expression of interest process will be undertaken by the government to identify ways of supporting the establishment of a Superannuation Consumer Advocate.

Authors: Michael Kohn and Ellen Karakoussis

Disclaimer

This article does not constitute legal advice, it is commentary on a topical issue. If anything discussed in this article concerns you please seek legal advice.

Queries

Should you wish to discuss any of the above matters, please contact a member of our Tax team

The Authors

Michael Kohn

PARTNER, MELBOURNE