Federal Budget 2018
Federal Budget 2018:
The Federal Budget 2018 that was handed down last night focused more on minor adjustments than sweeping reforms. In our view, it was a Budget designed to create short, sharp election headlines.Â However, there were also measures that will provide financial planning opportunities for many Australians.
One of the more significant announcements was the Governmentâ€™s determination to reduce personal income tax. Implemented over stages starting with tax relief for low and middle-income earners from 1 July 2018, and culminating in the elimination of the 37 per cent tax bracket (and increasing the lower threshold of the top tax bracket) from 1 July 2024.
A summary of the key points from the Budget that may affect your financial situation is provided below. Please remember that before any of these announcements can be implemented they will require the passing of legislation and may be subject to change.
A summary of the key budget measures include:
1. Making the tax system easier over the coming years by reducing tax brackets
2. Tax reductions for low and middle-income earners
3. Reduction in fees and a ban on exit fees on all super funds
4. Opt-in insurance for young and low super balance Australians
5. Increasing SMSF members from 4 to 6
6. Super trustees will need to build new retirement income options for their members
7. Expanding the pension loan scheme to all older Australians.
Changes to income tax bracket thresholds
From 1 July 2018, the Government will increase the top threshold of the 32.5 percent personal income tax bracket from $87,000 to $90,000.
The Government will increase the Medicare Levy low-income threshold for singles, families and single seniors and pensioners from 2017-18 income year.
Medicare Levy low-income threshold for families
The threshold for singles will be increased from $21,655 to $21,980.
The family threshold will be increased from $36,541 to $37,089.
For single seniors and pensioners, the threshold will be increased from $34,244 to $34,758.
The family threshold for seniors and pensioners will be increased from $47,670 to $48,385.
For each dependent child or student, the family income thresholds increase by a further $3,406, instead of the previous amount of $3,356.
2% Medicare Levy retained
The Medicare levy rate will no longer be increased from 2.0 to 2.5 per cent of taxable income from 1 July 2019.
Small business – extending the $20,000 instant asset write-off
The $20,000 instant asset write-off will be extended by a further 12 months to 30 June 2019 for businesses with aggregated annual turnover less than $10 million.
Small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019. Only a few assets are not eligible (such as horticultural plants and in-house software).
Personal Income Tax Plan
From 1 July 2018, the Government will introduce a seven year Personal Income Tax Plan over three stages that includes:
Step 1: Targeted tax relief to low and middle income earners
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