I am pleased to provide a summary of some of the proposals that I thought were most relevant and my views.

Personal income tax

The 32.5% upper threshold will be increased from $87,000 to $90,000 from 1 July 2018 which reduces the tax liability of those earning $90,000 or more by $135. A further increase in this threshold to $120,000 is proposed from 1 July 2022.

From 1 July 2024, taxpayers will pay the top marginal tax rate of 45 per cent from taxable incomes exceeding $200,000 and the 32.5 per cent tax bracket will apply to taxable incomes of $41,001 to $200,000.

My View: Australia is one of the highest taxed nations in the world, so tax cuts are always welcome. Not only does this improve our international competitiveness but it provides a greater incentive and reward for people to earn more.

Denying deductions for vacant land

Expenses associated with holding vacant land will cease to be deductible from 1 July 2019 and will not be able to be carried forward.

Such expenses for land that were previously vacant will only become deductible when:

• construction is complete, approval for occupancy has been granted and the property is available for rent, or
• the land is used in carrying on a business.

My View: Not great news for land bankers.

Superannuation

SMSF member limit increase

The maximum number of members allowable in self-managed superannuation funds (SMSFs) and small APRA funds will increase from four to six from 1 July 2019.

My View: Provides greater flexibility for SMSFs and the option to include more family members or business associates.

SMSF three-yearly audit cycle

SMSFs with a good record-keeping and compliance history will move from an annual audit to a three-yearly audit from 1 July 2019. To qualify the SMSF will be required to have three consecutive clear audit reports and lodged their annual returns on time.

My View: Further good news for members of SMSFs. Could reduce ongoing costs by up to $500 per annum.

Work test exemption for those with balances of less than $300,000

From 1 July 2019 those aged 65 to 74 with a total superannuation balance of less than $300,000 will be eligible to make voluntary contributions in the financial year following the year they last met the work test.

My View: Would have liked to see the work test removed completely but at least this provides retirees with potentially another year to contribute to super.

Individuals with multiple employers able to opt out of Superannuation Guarantee

Individuals who earn over $263,157 from multiple employers will be able to nominate that their wages from certain employers are not subject to the Superannuation Guarantee (SG) from 1 July 2018.

My view: Not ground breaking but a nice option for high income earners who could potentially increase their take home pay instead of having funds paid into their super fund.

Opt-in basis for default insurance inside superannuation

The Government proposes to amend the default insurance arrangement in superannuation funds, which currently requires members to opt-out of cover, to be on an opt-in basis. This change will apply to members:

• with a balance of less than $6,000
• under the age of 25 years, or
• whose account has been inactive (ie hasn’t received a contribution) for 13 months or more.

My view: Although most people are under-insured and tend to neglect personal insurances it is not a great outcome when premiums erode small super balances.

Banning exit fees

Exit fees will be banned on all superannuation accounts. In addition, all inactive superannuation accounts with balances below $6,000 will need to be transferred to the ATO. These changes will take effect from 1 July 2019.

My View: Should have been banned at the same time trail commissions were outlawed. Individuals deserve greater freedom and choice regarding their superannuation funds without being hampered by exorbitant exit fees.

Social security

Expansion of the Pension Loan Scheme

From 1 July 2019:

• all Australians of age pension age will be eligible, including full rate age pensioners (currently excluded from the scheme)
• the maximum loan amount will increase from 100 per cent to 150 per cent of age pension.

The loan is paid fortnightly, is tax-free and currently attracts compound interest of 5.25 per cent on the outstanding balance.

My View: Great that this scheme now includes non-pensioners however I would caution people from accessing this scheme too early on in retirement as the compounding interest on your Centrelink loan can rapidly erode equity in your home.

Extension of the Pension Work Bonus

From 1 July 2019 the bonus will increase from $250 to $300 per fortnight. This means that the first $300 of income from work each fortnight will not count towards the pension income test

My View: Not a major increase but retirees should not be overly penalised if they decide to continue working in some capacity.

If you would like to discuss your personal circumstances in relation to the Budget – or to discuss financial planning and investment advice more generally – please feel free to contact me.