Remunerator News

May 10 2018

2018 Federal Budget Update

On Tuesday, the Federal Treasurer handed down the 2018/19 Federal Budget.

From the perspective of Salary Packaging and Novated Leasing, the only effect has been on tax has come in the form of a tax refund to low- and middle-income earners.

Given it is in the form of a tax-refund, it won’t be received until after the 2019 financial year end. This is the mechanism used to ensure the relief goes specifically to the low- and middle-income earners and does not flow through to higher income earners which is what would occur if they implemented the tax relief through the usual adjustments to either the lower marginal tax rates or thresholds.

Changes aimed at protecting taxpayers from “bracket creep” will help higher income earners but won’t be enacted until 2023-2025.

The seven year plan is to have the following steps:

  1. There is to be a tax offset of up to $530 for low and middle-income taxpayers for the 2018-19 to 2021-22 years inclusive.
  2. It will be paid when your assessment issues
    • The savings are to be made up of:
    • $200 for taxpayers whose taxable income is up to $37,000
      • If your taxable income is between $37,000 and $48,000 you get an extra 3 cents per dollar of taxable income to a maximum of $530
      • If your taxable income is between $48,000 and $90,00 you will be entitled to $530
      • If your taxable income is between $90,001 and $125,333, the offset reduces by 1.5 cents per dollar.
  3. From 1 July 2018, the 32.5% personal income tax threshold is to increase from $87,000 to $90,000
  4. From 1 July 2022, the low income tax offset is to be increased and the 32.5% threshold is to be increased from $90,000 to $120,000
  5. From 1 July 2024, the 37% bracket (which currently applies between $87,001 and $180,000) is to be removed, at which time the $180,000 threshold will increase to $200,000

Another announcement was for Superannuation guarantee contributions.

From 1 July 2018, individuals with income in excess of $263,157 with multiple employers will be able to nominate that their wages from certain employers are not subject to superannuation guarantee contributions, allowing them to avoid unintentional breaches of the $25,000 contribution cap.