The 2019-20 Budget was unveiled against the backdrop of a federal election in May. After more than a decade of deficits, the budget returns to surplus in 2019-20.
Tax relief, investment in a strong healthcare system, more support for older Australians and more funding for education and skill were focal themes of the budget. This budget was quite conservative in its treatment of superannuation in comparison with last year’s budget, which produced the Protecting Your Super package.
It’s important to remember the announcements are only proposals and won’t become law until they pass parliament. This will largely depend on the outcome of the upcoming federal election in May.
No Work Test requirement up to age 66
It’s proposed that from 1 July 2020, Australians aged 65 and 66 will no longer need to meet the Work Test before making both concessional and non-concessional voluntary superannuation contributions. Currently, if you are aged from 65 to 74, you must work a minimum of 40 hours over a 30-day period to meet the work test to be eligible to make voluntary contributions in the same financial year.
Extended bring forward option for non-concessional contributions
From 1 July 2020, the ability to access the bring-forward arrangements for non-concessional contributions will also be increased by two years, if the recommended changes become law. Those aged 65 and 66 will be able to contribute a total of $300,000 in a single year (based on the annual $100,000 cap), effectively ‘bringing forward’ three years of future super contributions. Currently, only members under 65 can use the bring forward arrangement.
When combined with changes to the Work Test, this will provide retirees with more options to grow their retirement savings.
Raising the age limit for spouse contributions
It has been proposed that the age limit for receiving spouse contributions is raised from 69 to 74 years, which may help a couple even out their superannuation assets and may provide a tax offset to the contributing spouse.
Currently, anyone aged over 70 cannot receive contributions made by another person on their behalf. There is no age restriction on the person making the spouse contribution.
Super consumer advocate
The government will explore whether to establish a Superannuation Consumer Advocate. The Advocate would provide input on behalf of consumers in policy discussions and provide information to educate and assist consumers to navigate the superannuation system.
The government announced $21.6 billion in 2019-20 to strengthen aged care services with a focus on safety and quality.
- an additional 10,000 home care packages for older Australians who want to remain in their homes and need support,
- a $320 million general subsidy for people in residential care and $8.4 million to introduce mandatory reporting on quality of services,
- a National Plan to Respond to the Abuse of Older Australians including a national hotline, trials of frontline services for victims of abuse and developing a serious incident response scheme, and
- $185 million over 10 years to fund research into dementia, fall prevention and assistive technologies to support independence.
The government has proposed to provide about 10 million Australians with tax relief by bringing forward and changing its seven-year tax plan from last year’s budget.
The proposals include increasing the temporary non-refundable Low and Middle Income Tax Offset (LMITO) of up to $1,080 per year for people earning less than $126,000 in 2018-19. The LMITO will be received after individuals’ tax returns have been assessed for the 2018-19 and later years.
The maximum offset of $1,080 is more than double the offset of $530 announced in the 2018-19 Budget. You may wish to think ahead and decide if the money is best spent in making a one off contribution to your super, investing outside super or reducing your debt. You may wish to see a financial planner if you are unsure.
Energy assistance payments
Age pensioners and other pension recipients could benefit from a one-off energy bill payment of $75 for singles and $125 for couples.
Full details of these proposals are available from the budget website.
You may need advice
If you need more information or help understanding what these changes mean, call us on 1800 680 627. Should you need personal financial advice, we can refer you to Club Plus Financial Planning for a free initial consultation.