What's new for the 2018/19 financial year?
28 Aug 2018
By Shadforth Financial Group
The start of the new financial year brings a number of changes and some new opportunities.
Changes to personal tax
As part of a seven-year plan, the Government has implemented the first two parts of its personal tax reforms.
A new low and middle-income tax offset, or rebate, of up to $530 per annum will be applied for the next four years. This new offset is in addition to the existing low income tax offset. The new offset does not apply to people with salaries over $125,334.
The Government has increased the income threshold from $87,000 to $90,000 for the 32.5% tax bracket. The new 2018/19 tax rates and thresholds are shown in the table below.
|Income pa||Marginal tax rate %*||Tax payable pa|
|$0 - $18,200||0||Nil|
|$18,201 - $37,000||19||19 cents for each $1 over $18,200|
|$37,001 - $90,000||32.5||$3,572 plus 32.5 cents for each dollar over $37,000|
|$90,001 - $180,000||37||$20,797 plus 37 cents for each dollar over $90,000|
|$180,001 and above||45||$54,097 plus 45 cents for each dollar over $180,000|
* Plus 2% Medicare levy
From 1 July 2022, the Government plans to raise the 32.5% tax bracket again to $120,000, and from 1 July 2024 to $200,000. This will remove the 37% tax bracket completely and effectively cut the number of income thresholds from five to four, raising the highest tax rate of 45% to $200,000 (from $180,000).
Changes to child care assistance
The new Child Care Subsidy has now replaced the previous Child Care Rebate and Child Care Benefit. The Child Care Subsidy assists with the cost of approved child care including after-school care and vacation care. This subsidy won’t be automatically paid to you. You need to claim it through the Centrelink myGov website. When you claim you will find out if you are eligible because the Child Care Subsidy is now income-tested whereas previously the Child Care Rebate was not income-tested and was eligible to all income earners. For instance:
|If your family earns...||Then you receive a subsidy of...*|
|$60,000 pa||85% of the eligible child care fees|
|$150,000 pa||57% of the eligible child care fees|
|$250,000 pa||50% of the eligible child care fees (up to a cap of $10,190)|
|$300,000 pa||33.75% of the eligible child care fees (up to a cap of $10,190)|
* These calculations assume one dependant child. Results are indicative only and may vary based on your individual circumstances. See www.childcaresubsidycalculator.com.au
Applying for the Age Pension
If you’re nearing Age Pension age it’s important to note that you can, and should, apply for the Age Pension up to 13 weeks before reaching Age Pension age. This is because it can often take Centrelink months to process an application. These delays can mean that even if you submit your application just before reaching Age Pension age, you may be waiting months before receiving any Age Pension payment.
Also, before 1 July 2018, Centrelink could pay a ‘back payment’ for unpaid Age Pension payments to the time you made contact with Centrelink and expressed an ‘intent to claim’ the Age Pension — as long as you had reached Age Pension age and had submitted your claim and documentation within 14 days.
From 1 July 2018, you can no longer submit an intent to claim. You need to complete your claim in full before you can get a payment. This also includes concession cards. You need to submit all supporting documents, including proof of identity before Centrelink will start to process your claim.
Therefore, if you’re nearing Age Pension age, please contact us and start thinking about your application now.
Downsizer super contributions
Superannuation provides a concessional tax environment to provide money for your retirement including a zero-tax environment for account-based pensions1. That’s why the new downsizer super contribution measure is an excellent opportunity if you’re 65 or over and are looking to sell an eligible property.
The scheme allows those eligible, who sell their current or former home after 1 July 2018, to use the proceeds to contribute to super. If you qualify, you can contribute up to $300,000 as an individual or $600,000 as a couple. And, the scheme doesn’t just apply to your current home. It can also apply to a former home, such as an investment property you used to live in. However, conditions apply. For example, you or your spouse must have owned the home for ten or more years. Also, you need to have lived in the home at some point and claimed it as your principal home for tax purposes — including partially.
If you’re interested in the scheme, please contact us to find out if it is appropriate for you.
First Home Super Saver scheme
The First Home Super Saver (FHSS) scheme allows you to save for a deposit for your first home using your super account. The benefit of saving using your super is the concessional tax treatment of super which can help you save faster compared to a traditional savings account.
This scheme is suitable if you intend to live in the premises for at least six months of the first 12 months you own it, after it is practical to move in.
Make sure you apply for FHSS scheme amounts to be released before you sign a contract to purchase or construct a residential property or you may be liable to pay tax.
If you’ve made voluntary personal contributions to super since 1 July 2017, you can now apply to the ATO to release some or all of these contributions, plus earnings, to purchase your first home.
There are specific rules on how much super you can access and tax implications so please speak to us to make sure it’s the best option for you.
1 Subject to the $1.6m pension transfer balance cap per individual.