Step 2: Protecting middle income Australian from bracket creep
The top threshold of 32.5 per cent personal income tax bracket will be increased from $87,000 to $90,000. This measure takes effect from 1 July 2018. Other measures include:
- LITO will be increased from $445 to $645 (and withdrawn at a rate of 6.5 cents per dollar between incomes of $37,000 and $41,000, and at a rate of 1.5 cents per dollar between incomes of $41,000 and $66,667)
- 19 per cent personal income tax bracket will be extended from $37,000 to $41,000
- top threshold of the 32.5 per cent personal income tax bracket will be increased from $90,000 to $120,000. These measures take effect from 1 July 2022.
Step 3: Ensuring Australians pay less tax by making the system simpler
The 37 per cent tax bracket will be removed entirely:
- top threshold of 32.5 per cent personal income tax bracket will be increased from $120,000 to $200,000.
- 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.
These measures take effect from 1 July 2024.
Capping passive fees, banning exit fees and consolidating small and inactive super accounts
From 1 July 2019, there will be a three per cent annual cap on passive fees charged by superannuation funds on accounts with balances below $6,000 and 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.
Changes to insurance in superannuation
From 1 July 2019, insurance in superannuation will only be able to be offered on an opt-in basis for:
- members with low balances of less than $6,000;
- members under the age of 25 years; and
- members whose accounts have not received a contribution in 13 months and are inactive.
Work test exemption for recent retirees
From 1 July 2019, the Government will introduce an exemption from the work test for voluntary contributions to superannuation, for people aged 65-74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements. This measure will allow contributions to be made for an additional 12 months.
Increasing the maximum number of allowable members in SMSFs and small APRA funds from four to six
From 1 July 2019, the maximum number of members permitted in new and existing self-managed superannuation funds and small APRA funds will be increased from four to six.
Three-year audit cycle for some SMSFs
From 1 July 2019, self-managed superannuation funds with a history of good record-keeping and compliance will be subject to a three-yearly audit requirement rather than an annual audit requirement.
The Government announced it is developing a retirement income framework to increase flexibility and choice for retirees and help boost living standards.
Comprehensive Income Products for Retirement
The superannuation law will be amended to introduce a retirement covenant that will require superannuation trustees to formulate a retirement income strategy for superannuation fund members. The intention is to focus the industry on providing a higher standard of living for retirees.
The covenant will require trustees to offer Comprehensive Income Products for Retirement (CIPRs): products that provide individuals income for life, no matter how long they live. Offering a CIPR would be a core part of how trustees implement the retirement income strategy developed for their members.
Pension Work Bonus
From 1 July 2019, the Pension Work Bonus will increase from $250 to $300 per fortnight with the maximum unused amount that can be accrued increasing to $7,800 (up from $6,500).
In addition, the Government will extend the Pension Work Bonus to those who are self-employed. However, a ‘personal exertion’ test will be introduced to ensure the Pension Work Bonus is only available to those who are engaged in gainful work and not to those receiving passive income such as income from real estate.
Expanding the Pension Loan Scheme
From 1 July 2019, the Government will expand eligibility to the Pension Loan Scheme to include all Australians of Age Pension age. The Government will also increase the loan amount so that an individual can receive a fortnightly amount up to 150 per cent of the maximum Age Pension rate.