Tax cuts, thresholds and more: Everything you should know for the new financial year

The start of a new financial year usually heralds a raft of changes, but for those Starts at 60 fans approaching or in retirement, its time to take special note of what changes at midnight, June 30.

The stage 3 tax cuts are now law and you’ll probably see the impact in your next pay packet if you are still in the workforce.

While the changes have received plenty of coverage, it’s worth noting the new minimum amounts you can earn before you pay tax.

For those under age pension age, an increase in the minimum Medicare threshold, the lower income tax rates and the existing low income tax offset means that a person can now earn $22,575 per annum, before they are liable to pay tax or Medicare levy.

This is a significant number for people who use tax minimisation strategies such as salary sacrificing large amounts into superannuation.

Because those contributions are subject to at least a 15 percent contributions tax, salary sacrificing to the point where your income is below $22,575 is a waste of money.

Why ?

Because the 15 percent contributions tax applies, no matter what personal income tax you pay.

For those over age pension age, the Seniors and Pensioners Tax Offset or SAPTO applies, lifting the tax-free income threshold even higher.

For a single, the new threshold increases to $35,813 meaning that seniors below this income pay no tax. That also means you normally don’t need to lodge a tax return unless there are other activities going on like an investment property or a small business operation.

A quirk in the calculation system means that for couples, the tax free threshold lifts to $31,888 each. A senior couple could earn a combined $63,776 and pay no tax.

The recent lift in the minimum wage of 3.75 percent takes effect July 1 and that often flows through to a number of awards and other wage agreements in place.

Irrespective of the wage increase, all Australians will receive an extra 0.5 percent of their ordinary time earnings paid into their super. That lifts the compulsory employer superannuation payment to 11.5 percent with the last increase to 12 percent, due to kick in this time next year.

Remember that the $450 per month minimum was scrapped 2 years ago and the 11.5 percent is payable from dollar 1.

If you’re over 60 who perhaps does some part-time work at a coffee shop for example, super is payable on whatever you earn – pre tax.

Those stashing the spare cash into super, will benefit from a lift in the superannuation contribution caps.

The annual concessional contribution cap rises to $30,000. Concessional contributions are those contributions where someone is claiming a tax deduction and that includes the bosses compulsory payments, salary sacrificed amounts and contributions you make and claim a tax deduction for.

The increase in the concessional contribution cap flows through to the non concessional cap. From July 1, it is $120,000. You can apply this new limit to the bring-forward rules where up to 3 years worth of non-concessional or $360,000 can be contributed in one hit.

And no, you can’t drop in an extra $30,000 if you fully utilised the $330,000 bring-forward trick within the past few 3 years.

There’s also limitations on non-concessional contributions if you are approaching the transfer balance cap of $1.9 Million.

A nice problem to have.

For those on a part-pension, the indexation to the means test thresholds means that if nothing has changed since your last update, your pension is about to increase.

For someone on a means-tested pension, they will see an increase in their next payment.

If you are income tested, a single can expect an extra $4 a fortnight and couples, a combined $6 a fortnight.

The numbers are far more impressive for asset tested pensioners.

A home owning single should see a $36.75 per fortnight increase and couples, a combined $55.50.

The extra amount allowed for non-home owners means a single’s asset tested pensioner could lift by $67.50 a fortnight and for couples a combined $85.50.

Remember that in all cases, you can’t exceed the maximum fortnightly pension payable which for a single, is $1,116.30 and for couples, $841.40 each.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.