What the 2018 Federal Budget means for you
Scott Morrison was the most featured face on Australian televisions last night after announcing the Government’s Federal Budget for 2018, which is likely to be the last one before we all head to the polls again for another national election.
But over here at Mozo, we know that the endless number of headlines and talk show segments can get a bit much, which is why we’ve taken it upon ourselves to give you the cold hard, personal finance facts from the Treasurer’s big announcement.
Income tax on employees was arguably the biggest talking point heading into this year’s budget and it certainly stood out in ScoMo’s speech on Tuesday night as he announced a low income tax offset (LITO).
From next July, if you earn less than $37,000 you’ll see your tax bill reduced by about $200 with the offset gradually increasing to a saving of $530 for those earning $90,000 or less - which is what you might have heard referred to as the “$10 per week” tax cut.
For those earning above $90,000 the tax relief reduces to zero at just over $125,000.
Oh, and more good news for all of the Australian workers out there as any speculation about a Medicare levy hike was expectedly quashed, as well.
What he said: “In this Budget we are providing tax relief to encourage and reward working Australians and reduce the cost pressures on households.”
The Budget also delivered some big wins for Australian pensioners.
First up, the Pension Work Bonus now allows elderly Australians to earn an extra $1,300 per year - now $300 a fortnight - without it affecting their pension payments.
And the Pension Loan Scheme, targeting both full rate pensioners and self-funded retirees, will give you the chance to boost your retirement income by up to $17,800 for a couple, without impacting on your pension or other benefits. What it means is that you’re essentially mortgaging your house to the Government.
What he said: “Just because you are getting older does not mean you should have to surrender your dignity or your choices. We're living longer. It's a good thing. We want to preserve and increase the choices of older Australians.”
Small business owners
As always, the Budget announcement featured some pretty important talking points for cafe owners and budding entrepreneurs around the country with their own small businesses.
The good news came mainly for those in the brewing business who will now save a stack of money as Morrison announced the Coalition will scrap the 40% tax that these companies currently pay for using smaller sized kegs.
And thankfully, the Government opted to extend the $20,000 cap on instant tax refunds for capital assets - things like computers, office equipment and furniture or even cars - for another year, until June 30th 2019.
What he said: “For small business we will once again extend the instant asset write off for businesses with a turnover up to $10 million for purchases of up to $20,000.”
Anyone who pays super
If you’ve been diligently stashing away extra cash in your superfund, you’ll be happy to know that last night’s announcement included some changes to secure our precious source of retirement income.
To start with, Morrison announced the banning of superannuation exit fees, giving you the freedom to move your retirement money around.
A 3% cap on fees for accounts with less than $6,000 will also be applied and any inactive super accounts (with less than $6,000 in them) will be transferred over to the ATO who will then look to reunite them with their rightful owner.
Finally, if you’re a young person and don’t have a lot of money in your super account yet, the Government has promised to stop superannuation funds forcing those under the age of 25 to pay for life insurance policies as part of their super.
What he said: “Through the ATO we will be proactively finding your lost super and have it sent to your active superannuation account, ensuring it doesn't get eaten up in ongoing fees.”
Homeowners and investors
This Federal Budget wasn’t as exciting as previous editions when it comes to property, and certainly not as pulse-racing as regulatory news that APRA will lift investor lending restrictions on our big banks this year.
In saying that, as we do over here at Mozo, we ran the numbers on the income tax breaks you are set to receive as part of this year’s budget and found out exactly what that could mean for your home loan and credit card (HINT: There are serious savings to be had).
And no news is good news, as far as the property investors out there are concerned as the Government opted not to change any of the laws surrounding negative gearing (or to mention it whatsoever).
What he said: (Nothing, that’s the point).
Australians with a bank account
He was a bit light on the details, but the Treasurer also hinted that we’ll be getting a new, highly competitive open banking system in the near future.
Not sure what that is or what it could mean for you? Check out our handy open banking guide for more details.
What he said: “In this Budget we are also moving forward with our Open Banking Regime and consumer data right, giving small businesses and households more control, more choice and better deals.”
Feel like you need to rejig your family budget after any of these changes? Check out Mozo’s budget calculator to do exactly that, or head over to our family finances hub for tips, articles and tools that help make your household that little bit more money-savvy