I have extracted this information from the many commentaries on this year’s Budget we have received over the last few days. I’ve tried to take out all the fluffy stuff and leave in what you may find interesting, as it has some impact on you or your loved ones. I’ve also added in my comments on some of the points – some supportive, some not.

It’s important to remember while reading this that the Budget is the Government’s Wish List. It is what they would like to happen but as you’re aware, with our parliament structured the way it is, many of these things won’t happen in the way they are currently positioned and some, because they are set to happen many years (and elections) into the future, will never happen. Sometimes it is very difficult to remember what happened yesterday, let alone forecast what’s going to happen 5-10 years into the future. Many of the items are to start 1st July 2019 which will be after the next election so may get nixed if the Labor Party win the election when it happens.

Personal tax

The main headline – and fighting point – of the Budget is lower personal tax rates to make the system ‘fairer and simpler’ – with the Labor Party already screaming that the suggested changes aren’t fair and favour the rich – BUT the Labor Party’s definition of “rich” is very different from yours and mine. When they released their proposed tax policy a few weeks ago, their definition of “rich” seemed to be anyone who owned direct shares!! They have backed off this since then, but it still seems that if you don’t qualify for, at least, a part-Age Pension, they consider you to be rich. Mmmmmm!

The changes to personal tax are partly about addressing bracket creep caused by rising wages growth – albeit low growth. I’ve taken these diagrams from Graham Hand’s Budget 2018: Highlights including new retirement income choices in Cuffelinks as they summarise what’s going on and how the changes to marginal tax brackets may address the wages growth over the next 7 years. Here is the impact: with the long-term plan of keeping more Australians out of the higher brackets:

Tax 1

The top income threshold of the 32.5% tax bracket will increase to $90,000 on 1 July 2018 from the current $87,000.
There will be a new tax offset of up to $530 for low to middle-income earners starting next year. This will give tax relief to an estimated 10 million people with 4.5 million getting the full amount. Of course, Labor have come out with a bigger number – BUT, it’s only available the following tax year!
The rest of the changes to address bracket creep are delayed until 2022-23 and 2024-25 – see what I mean about several years and several elections away?

Business owners may benefit from an extension of the small business instant write-off provisions to 31 June 2019. The Government has further committed to its plan to reduce the corporate tax rate to 25% for all businesses (but this is currently stalled in the Senate).
Funding for regulatory compliance and enforcement has also been ramped up.


The proposed Medicare Levy increase from 2% to 2.5% from 1 July 2018 (announced in the previous budget) has been abandoned, and the Medicare Levy will remain unchanged at 2%.
Medicare low income thresholds increase with a proposed effective date of 1 July 2018, to take account of movements in the Consumer Price Index (CPI). The current exemptions from the Medicare levy will remain in place. The thresholds announced for 2017/18 are shown below.
No Medicare if taxable income is equal to or less than ($):
Singles 21,980
Singles eligible for SAPTO 34,758
Families 37,089
Families eligible for SAPTO 48,385
Additional for each dependent child/student 3,406

Superannuation and SMSFs

The plan is to introduce a one-year exemption from the work test for voluntary contributions to super for people aged 65-74 with super balances below $300,000 at the start of the financial year. This gives retirees flexibility in the transition after work, e.g. a person retiring on 1 June 2020 with only $150,000 in super and, now, doesn’t meet the work test, could put $45,000 at concessional rates (using the carry forward arrangements) and $100,000 in non-concessional contributions, almost doubling the super balance. This measure will allow greater flexibility for recent retirees who are transitioning into retirement. It also provides an opportunity to maximise the tax-free component of a superannuation balance by taking a lump sum benefit and contributing it to superannuation.
E.g. Tom retires from the work-force on 25 June 2019 at age 67 after working full-time at the same employer for over 25 years. On 3 July 2019, he receives his final payment from his employer which includes a significant amount of unused annual and long service leave entitlements. Tom can now add this to his superannuation balance to start a pension. As Tom retired from the workforce in the 2018/19 financial year and the contribution that he intends to make is in the 2019/20 financial year, under the current rules, he would be unable to meet the work test. The exemption allows Tom the flexibility to contribute this amount without having to extend his retirement date to satisfy this requirement.
With effect from 1st July 2019, there are some (more) plans to protect small super balances aimed at ‘reuniting’ Australians with their low balance, inactive superannuation accounts through the ATO – any inactive account below $6k will be transferred to the ATO and data matching will be used to connect these funds to the member’s active accounts. Total fees on super accounts of less than $6,000 are to be capped at 3% and exit fees on all super accounts will be banned.

Life insurance in superannuation for people under the age of 25, plus those with low balance accounts or inactive accounts, will be an opt-in. Care, if one of the younger members of your family would like to talk to us about protecting themselves – and the impact they may have on you, if they don’t – please ask them to call us for a chat.
Additionally, some high-income earners (who are lucky enough to earn above $263,157), with multiple employers, will be able to nominate that their wages are not subject to SGC from 1 July 2018. This will stop them breaching the $25,000 cap on concessional contributions – and some lucky people may be able to negotiate a higher income instead!


The Budget confirms the maximum number of members allowed in an SMSF will rise from four to six to give more flexibility for larger families. Great news for those with SMSFs and 4 kids – opens up a lot of opportunities to help your off-spring.
Audits of SMSFs will now be every three years instead of annually where the fund has a clean audit history.

Pension Loans Scheme

The Pension Loans Scheme (PLS) is a reverse mortgage which allows retirees to supplement their income – reverse mortgages haven’t been very popular in Australia (more so overseas, especially those countries with death duties where a lot of family wealth is tied up in the home) because of the ruinously high interest rates our banks have been charging on the facility. This scheme recognises that many Australians have most of their wealth tied up in the family home, so the current PLS is expanding from 1 July 2019. The new arrangement will give all retirees of age pension age access to this home equity release (reverse mortgage) to supplement their income in retirement. Full-rate pensioners can draw income of up to $11,799 for singles and $17,787 for couples by unlocking equity in their home.

PLS participants can stop or start at any time and repay the loan if they wish, although this usually happens when the home is sold – either to go into Aged Care or by the estate when the second partner dies. There are age-based limits on the loan-to-value ratio, and the current borrowing rate is 5.25% (not especially generous given it has been this rate since 1997 but an awful lot better than the banks offer, if they even offer the facility). The Government estimates that 1.8 million Centrelink pensioners own their own home: 1.1 million on the maximum age pension and 700,000 part-age pensioners.
Also, from 1 July 2019, the maximum allowable combined age pension and PLS income stream will be increased to 150% of the age pension rate.
E.g. a maximum rate pensioner on $908 a fortnight ($23,598 a year) can choose to receive an additional $6,000 a year giving 125% of the age pension, supported by the house valued at $400,000. Income streams from the PLS are non-taxable and not means tested.

Retirement income framework

Products that address the risk of people outliving their savings are currently limited in take-up, largely, in our opinion, because they are poorly structured and expensive. We’ve back-tested a number and relatively simple investment strategies have performed better with improved flexibility. There is no obligation for superannuation funds to address your long-term retirement income – at the moment, if you run out of money, you’ve run out of money. It’s that simple.
The Government is introducing a ‘retirement income covenant’, requiring super funds to help members achieve retirement income objectives – mmmmm! This is what we do for you now so it will be interesting to see the detail of how the funds can achieve this without giving advice, for which they are neither licensed or qualified.
In the future, trustees must offer a Comprehensive Income Product for Retirement (CIPR) that provides income for life, no matter how long you live. This will be a major boost to providers of products like lifetime annuities which currently have a relatively low up-take because of the very low interest rates on which they are based.
From 1 July 2019, new age pension means testing rules will apply to pooled lifetime income streams. A fixed 60% of all pooled lifetime product payments will be assessed as income for age pension eligibility, and 60% of the purchase price of the product will be assessed as assets. These apply until the age of 84 (or a minimum of 5 years), and then 30% for the rest of the person’s life. This will mean a trade-off between increased Age Pension, investment returns and flexibility – and those are just my thoughts before they put out more detail.

Pension Work Bonus
Another one from 1 July 2019: the Pension Work Bonus will rise by $50 to $300 per fortnight, meaning income from work will not count towards the pension income test up to this limit. When added to the income free area (currently $168 a fortnight for singles and $300 for couples), a single person with no other income will be able to earn up to $468 a fortnight from work and receive the maximum age pension. The Work Bonus applies only to actual engagement in gainful work, not income from investments.

Financial Service Royal Commission

Building on the measures already announced, such as $5.9 million for ASIC in 2017/2018, this Budget gives $10.6 million to ASIC and $2.7 million to APRA to assist in their involvement in the Royal Commission. The cost will be offset by various industry levies which will be passed down the chain – we have been put on notice that we will be charged this levy from 1st July 2018

Another major feature of the Budget is a 10-year national infrastructure plan to reduce congestion, improve safety and create jobs. It supplements major projects already underway across the nation.
• In Queensland, the Federal Government is providing $5.2 billion for new major projects, including:
• an additional $3.3 billion for priority upgrades on the Bruce Highway,
• an additional $1 billion for the M1 Pacific Motorway,
• $390 million for the Beerburrum to Nambour Rail Upgrade,
• $300 million for the Brisbane Metro project and
• $170 million for the Cunningham Highway — Yamanto to Ebenezer (Amberley Interchange).

If you’re interested, the other states are getting some money too:

• NSW: $1.5 billion for new major projects, including $971 million for the Pacific Highway Coffs Harbour Bypass, $400 million for the Port Botany Rail Line Duplication and $155 million for the Nowra Bridge. Also, the Commonwealth and New South Wales governments will be equal partners in funding the first stage of the North South Rail Link in Western Sydney.
• Victoria: $7.8 billion for new major projects, including a commitment of up to $5 billion for the Melbourne Airport Rail Link (when we were in Melbourne last week, my wife and I were commenting on the serious need for this link), $1.8 billion for the North East Link, $475 million for Monash Rail, $225 million for electrification for the Frankston Rail Line to Baxter, $140 million for a Victorian congestion package, $132 million to complete the duplication of the Princes Highway East from Traralgon to Sale and $50 million for Geelong Rail Line upgrades.
• WA: $2.6 billion for new major projects, including a further $1.1 billion for the METRONET rail project, $944 million for a Perth Congestion Package and $560 million for the Bunbury Outer Ring Road.
• SA: $1.8 billion for new major projects, including $1.4 billion for North-South Road Corridor projects, with the Regency Road to Pym Street section of the Corridor to receive $177 million, $220 million for the Gawler Rail Line electrification and $160 million for the Joy Baluch Bridge.
• Tassie: $461 million for the Bridgewater Bridge replacement and an additional $59.8 million for the Tasmanian Freight Rail Revitalisation Package.
• ACT: $100 million for the Monaro Highway Upgrade.
• NT: $280 million for upgrades of the Central Arnhem Road and the Buntine Highway.
The Government is also providing equity of up to $5.3 billion in WSA Co to deliver stage one of Western Sydney Airport by 2026.

There are cuts to the ABC’s budget, with $84 million removed over the three-year funding cycle. It does not completely cut funding from the ABC, but rather prevents automatic increases in the amount of taxpayer money funnelling through to the network. This money will be invested in other areas within the federal communications portfolio.
Incentives to encourage business to create more jobs
Hire someone age 50 and over and you’ll be eligible for a subsidy against that mature age person’s wages of up to $10,000 + $19 million to fund up to $2,000 contributions toward training mature workers (45-70) with a requirement for employers to match the Government funding.
And, there is $85 million to fund 40,000 additional places to help young (15-20) people at risk of long-term unemployment to build their work skills

Aged Care
$1.6 billion over the next 4 years to fund 14,000 additional high-level home care packages from 2018/9 (on top of the 6,000 delivered in the Mid-year Economic and Fiscal Outlook) + an extra 13,500 residential place will also be provided in 2018/9.
There is also improved funding for some aspects of mental health for the aged:
• $82.5 million for services to combat depression and loneliness amongst older Australians
• $33.8 million for Lifeline
• $33 million additional funding to reduce some of the gap in palliative care services within residential aged care facilities
• $20 million for a pilot service helping older Australians living at home to remain connected within their community
• $23 million to boost the physical activity of seniors and
$22 million new funding to protect seniors from abuse, including the development of a national plan on elder abuse plus a national online register for enduring powers of attorney

Education initiatives
$4.5 million for programs encouraging women to consider Science, Technology, Engineering and Math (STEM) careers
$69 million for a range of initiatives relating to artificial intelligence and machine learning
The Budget also provides $190 million in funding over five years to support older workers to transition to the new economy and re-skill, including building digital and entrepreneurial skills, in order to remain longer in the workforce
$136 million to support mature age job seekers registered with a jobactive provider to enhance employability, develop digital skills and identify opportunities in local labour markets
$15 million for employees who are retrenched or planning to retire to consider alternative paths to remain in the workforce
$18 million for Inclusive Entrepreneurship Facilitators to encourage older workers to consider entrepreneurial options as an alternative to employment
There will be a combination of $145 million funding increases in order to boost support for older Australians in the indigenous community, as well as in remote & rural areas

Keeping Australia safe
Australian airports will receive boosted funding to crack down on visa cheats, with $122 million to increase border force capability at nine domestic and international airports.
Additional airport spending will introduce international-style body scanners, improved X-ray technology, more security and specially trained aviation guards at a cost of $293.6 million.
$50.1 million will be spent to enhance security arrangements at 64 regional airports with new and upgraded screening technologies and associated infrastructure; $122 million will be spent to enhance screening capability for inbound air cargo and international mail with new and upgraded equipment and advanced technology; and an additional $122 million to increase the presence and speciality capabilities of the Australian Federal Police and Australian Border Force at nine major domestic and international airports.
Targeting the welfare system
Welfare recipients with unpaid court fines or outstanding criminal warrants will be targeted under new hard-line government measures laid out in the federal budget.
Those with Centelink debts of more than $10,000 will also be cracked down on, as well as prisoners who are currently drawing a disability support pension.
Prisoners drawing a disability support pension will only be able to have their payments suspended for 13 weeks – down from two years – before the benefits are cut off.

Cracking down on the black economy
Multinational companies particularly in the digital space will face renewed pressure to pay their fair share of tax.
The Government is also providing $130.8 million in additional funding to the ATO to help ensure individuals are paying the right amount of tax.
An additional $133.7 million will also be provided to strengthen the ATO’s ability to ensure that debts accrued by individuals and businesses are paid.

Australian families are set to save up to $400 off their annual energy bill thanks to the National Energy Guarantee.
The Government also announced an “energy made easy” price comparison website which will help families compare their current deal against that of other retailers in the market.
The Government has also secured domestic supply and lowered gas prices, with wholesale price offers falling by around 50 percent from their peak levels last year.

After all that effort on Budget revenue and expenses, this is where the money goes:

Also taken from Graham Hand’s Budget 2018: Highlights including new retirement income choices in Cuffelinks

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