With the ushering in of a new financial year, certain rates and thresholds have increased, and several legislative instruments have taken effect. These may impact your personal finances moving forward.
Given this, in this article we will focus on the state of play from 1 July 2019. More specifically, regarding the numerous changes that have taken place within three key personal finance areas – employment, social security, and superannuation.
Employment
National minimum wage and modern award minimum wages
With a rising cost of living, and a relatively sluggish wage growth environment, some may be feeling a slight pinch in the hip pocket when it comes to the availability of surplus income or making ends meet.
Given above (and other considerations), the Fair Work Commission recently determined that it was appropriate to increase the national minimum wage and modern award minimum wages. As of 1 July 2019:
These increases take effect from the start of the first full pay period that starts on or after 1 July 2019.
Study and training loan repayment
As of 1 July 2019, there are new study and training loan repayment rates and thresholds. The new rates and thresholds are contained within the below table.
Study & Training Loan Repayment: Rates & Thresholds |
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Repayment income |
Repayment rate |
Repayment income |
Repayment rate |
Below $45,881 |
Nil |
$84,433 – $89,498 |
6.0% |
$45,881 – $52,973 |
1.0% |
$89,499 – $94,868 |
6.5% |
$52,974 – $56,151 |
2.0% |
$94,869 – $100,560 |
7.0% |
$56,152 – $59,521 |
2.5% |
$100,561 – $106,593 |
7.5% |
$59,522 – $63,092 |
3.0% |
$106,594 – $112,989 |
8.0% |
$63,093 – $66,877 |
3.5% |
$112,990 – $119,769 |
8.5% |
$66,878 – $70,890 |
4.0% |
$119,770 – $126,955 |
9.0% |
$70,891 – $75,144 |
4.5% |
$126,956 – $134,572 |
9.5% |
$75,145 – $79,652 |
5.0% |
$134,573 and above |
10% |
$79,653 – $84,432 |
5.5% |
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The new rates and thresholds pertain to the following study and training loans:
Social security
Lifetime income streams
As of 1 July 2019, new legislation has taken effect. It relates to the assessment of lifetime income streams (e.g. certain annuity products), with regards to the Social Security Asset and Income Tests (e.g. in terms of the Age Pension).
Under the new rules, lifetime income streams purchased on or after 1 July 2019 are assessed as follows:
Please note: Grandfathering applies to lifetime income streams purchased before 1 July 2019.
Pension Loans Scheme
The Pension Loans Scheme (PLS), is the Government’s version of a reverse mortgage offering those eligible an income stream to supplement their retirement income for a short, medium or long-term timeframe.
As of 1 July 2019, new legislation has taken effect to increase the maximum PLS plus pension/payment amount, from 100% to 150% of the maximum rate of the pension/payment (plus any available supplements). In terms of participating in the PLS:
Please read our article, ‘Reverse mortgages: The Pension Loans Scheme’, for more information.
Work bonus
As of 1 July 2019, new legislation has taken effect, and it relates to the work bonus:
Superannuation
Anti-detriment payments
As at 1 July 2019, super anti-detriment payments are no longer available.
It’s important to note that super funds were still able to make super anti-detriment payments until 30 June 2019 for those members who passed away before 1 July 2017.
For context, if a super death benefit was paid out to an eligible dependant as a lump sum payment, then in some cases an additional payment benefit payment may also have been paid.
This additional payment was referred to as a super anti-detriment benefit payment and represented a refund of the 15% contributions tax paid by the deceased person during their lifetime.
Carry forward provision
The carry forward provision, which came into effect from 1 July 2018, allows you to carry forward unused concessional contributions cap amounts on a rolling basis for a period of up to 5 years.
Given above, this is the first year that you may be able to make additional catch-up concessional contributions using unused concessional contribution cap amounts from ‘previous years’ (2018-19).
Please see here for more information regarding the relevant eligibility requirements.
Government co-contribution
The Government co-contribution is available if you who make an eligible personal contribution (a non-concessional contribution) to your super fund, and you satisfy the other relevant eligibility requirements.
Importantly, one of the other eligibility requirements refers to your total adjusted income. As of 1 July 2019, the lower and higher income thresholds have increased to $38,564 and $53,564, respectively.
Moving forward, the maximum Government co-contribution of $500 reduces by 3.333 cents for each $1 of income earned over $38,564, and cuts out when your income reaches $53,564.
Please see here for more information regarding the relevant eligibility requirements.
Maximum superannuation contribution base
Compulsory private savings via Super Guarantee forms a part of the Government’s three-pillar approach regarding the sustainability of Australia’s retirement income system (in the context of an ageing society).
The Super Guarantee contribution rate is currently 9.5% of your earnings up to a certain limit for each quarter of a financial year. This limit is called the maximum superannuation contribution base (MSCB).
As of 1 July 2019, the MSCB has increased to $55,270 per quarter, which works out to be $5,250.65 Super Guarantee per quarter ($21,002.60 Super Guarantee annualised).
Low-rate cap amount
If you reach preservation age, and make a lump sum withdrawal from super before age 60, the low-rate cap is the limit on the taxable components of your withdrawal that can be taxed at a concessional lower rate.
As of 1 July 2019, the low-rate cap amount has increased to $210,000. Please note: The low-rate cap amount is reduced by any amount previously applied to the low-rate threshold.
In a similar vein to the above, the untaxed-plan cap amount has increased to $1,515,000.
Protecting your superannuation
As of 1 July 2019, new legislation has taken effect. It relates to the charging of fees and costs, provision of insurances, transferring of accounts to the ATO, and reconciliation of unclaimed money.
Please read our article, ‘1 July 2019: Protecting Your Superannuation Package’, for more information.
Work test exemption
As of 1 July 2019, new legislation has taken effect, and it relates to the work test and contributing to super.
Briefly, there is now an exemption from the work test for voluntary contributions to super, for people aged 65-74 with super balances <$300,000, in the first year that they don’t meet the work test requirements.
Existing annual concessional (and, the carry forward rules), and non-concessional contribution cap limits (and, the bring forward rules) continue to apply to the contributions permitted by the exemption.
Please watch our animation, ‘Superannuation: Work test exemption’, for more information.
Other important announcements
Loan serviceability assessments
The Australian Prudential Regulation Authority (APRA) have advised that they are proceeding with revisions to their guidance on the serviceability assessments that authorised deposit-taking institutions (ADIs) perform on residential mortgage loan applications. In a nutshell, taking effect immediately, ADIs will be able to review and set their own minimum interest rate floor for use in serviceability assessments and utilise a revised interest rate buffer of at least 2.5% over the loan’s interest rate.
Personal Income Tax Plan
The Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019 has passed through parliament. In a nutshell:
1. The low and middle income tax offset (LMITO) has increased from a maximum amount of $530 to $1,080 per annum, and the base amount has increased from $200 to $255 per annum for the 2018-19, 2019-20, 2020-21 and 2021-22 financial years. This is what it looks like for taxpayers with the following taxable incomes:
2. From 1 July 2022:
3. From 1 July 2024-25, the 32.5% personal income tax bracket will reduce to 30%. This is what it will look like for taxpayers with the following taxable incomes:
If you have any questions regarding this article, please do not hesitate to contact us.