The Budget and what over-60s in Australia need to know

Treasurer Scott Morrison has handed down the federal Budget and there are big changes to superannuation.

It’s bad news for high income earners and people with superannuation balances of over $1.6 million, but great news for low income earners who want to contribute more to their accounts. There are also changes to personal, small business and multinational income tax with the Treasurer stating, “Any increases in tax revenue as a result of measures contained in the budget have been re-invested back into lower taxes, not towards fuelling unsustainable higher spending.”

We know breaking down the Budget can be a little tedious so here are the main things you need to know:

Superannuation

From the 1st July 2017, the Government will introduce a transfer balance cap of $1.6 million on amounts moving into the tax-free retirement phase, limiting the amount of tax-free income wealthy retirees can earn. This will be applied to both current retirees and to individuals yet to enter their retirement phase. The tax on concessional contributions will be increased from 15% to 30% for those earning over $250,000. The annual cap on concessional super contributions will be reduced to $25,000 and a new lifetime cap on non-concessional contributions of $500,000 will be introduced. Morrison says these changes will affect only the top 3% of superannuation members.

On the other hand the government is introducing a Low Income Superannuation Tax Offset which will allow individuals with an adjusted taxable income of up to $37,000 to receive a refund into their superannuation account of the tax paid on their concessional contributions, up to a cap of $500.  The offset is also designed to increase flexibility for low income earners allowing more self employed people to claim tax deductions for personal super contributions, encouraging partners to make contributions to their low-income spouses super accounts, removing restrictions that prevent people aged between 65 and 75 from making contributions to their superannuation and allowing people with interrupted work (predominantly women and carers) to rollover unused concessional caps to make extra contributions. These superannuation reforms will raise $2.8 billion over four years.

Health

The Government will provide an estimated additional $2.9 billion over three years for public hospitals to improve patient safety and reduce avoidable hospitalisations. Morrison also mentioned that they will take a new approach to essential dental services for children and low income adults, but did not elaborate.  The government will also establish a savings fund for the National Disability Insurance Scheme. Savings made from better targeting of the welfare system will be reinvested back into the NDIS to contribute to the current funding gap in the scheme.

Cigarettes

The government will increase the excise on tobacco products by 12.5% each year from 2017 to 2020, bringing the cost of a single packet of cigarettes up to $45 in 2020. 69% of the ticket price will be tax. Scott Morrison says this will raise $4.7bn over the next four years.

Tax

The middle tax threshold will increase from $80,000 to $87,000, saving $6 a week for people earning $80,000 or over per year.

Morrison also announced: the small business tax rate will be lowered to 27.5 per cent and the turnover threshold for small businesses able to access it will be increased from $2 million to $10 million; new laws to prevent tax avoidance from multinational companies will be backed up by a taskforce of 1000 ATO staff raising$3.9 billion in revenue over the next four years; a new work for the dole scheme called PaTH – Prepare, Trial, Hire, which includes training and an upfront payment of $1000 and then subsidies of between $6500 and $10,000 for businesses who hire eligible youths; a $594 million plan for an integrated inland rail link connecting Brisbane and Melbourne and a plan for an advanced defence manufacturing industry with 9 frigates, 12 offshore patrol vessels and 12 new submarines to boost defence capability and jobs.

How will the changes affect you?