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[av_heading heading=’The News Brief_20201021′ tag=’h1′ style=’blockquote modern-quote modern-centered’ subheading_active=’subheading_below’ show_icon=” icon=’ue800′ font=” size=’6vw’ av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’20’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=’custom-color-heading’ custom_font=’#000000′ icon_color=” margin=’0′ margin_sync=’true’ padding=’0′ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kghp25v8′ admin_preview_bg=’rgb(34, 34, 34)’][/av_heading]

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[av_heading heading=’Budget measures for individuals’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kghp2kuc’ admin_preview_bg=”][/av_heading]

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Here are some of the Budget measures that will affect individuals.

Low and middle-income earners – tax cuts

As widely anticipated, the government will bring forward to the current tax year (2020–21) the tax cuts scheduled to apply for 2022–23 and 2023–24 (Stage 2 tax cuts). Those rates will therefore apply for 2020–21, 2021–22, 2022–23 and 2023–24.

Income tax rates from 2020–21 to 2023–24 — residents

Taxable income Tax rate
Up to $18,200                              Nil
$18,201–$45,000 19%
$45,001–$120,000 32.5%
$120,001–$180,000 37%
$180,001 and over 45%

 The legislated 2022–23 and 2023–24 rates for non-residents and working holiday makers will also be brought forward to 2020–21. 

The legislated rates to apply from 2024–25 under the Stage 3 tax cuts are unchanged.

Income tax rates from 2024–25 — residents

Taxable income Tax rate
Up to $18,200 Nil
$18,201–$45,000 19%
$45,001–$200,000 30%
$200,001 and over 45%

Low income tax offset

As a consequence of bringing forward the Stage 2 tax cuts due to start in 2022–23, the new low income tax offset (LITO) will apply from the current tax year (2020–21), replacing the existing LITO.

The maximum amount of the new LITO will be $700, payable for taxable incomes up to $37,500. No LITO will be payable once taxable income reaches $66,667.

Taxable income Amount of LITO 
$0–$37,500 $700
$37,501–$45,000 $700, less 5% of the excess
$45,001–$66,667 $325, less 1.5% of the excess

Low and middle income offset retained for one year

The low and middle income tax offset (LMITO) was legislated to cease from 2022–23 when the new LITO was going to be introduced. Although the new LITO has been brought forward to the current tax year, LMITO has not been scrapped – and will still apply for 2020–21 (but not beyond).

Taxable income Amount of LMITO 
$0–$37,000 $255
$37,001 – $48,000 $255, plus 7.5% of the excess
$48,001 – $90,000 $1,080
$90,001 – 126,000 $1,080, less 3% of the excess
$126,001 + Nil 

Summary of individual income tax rates — residents

To 30 June 2018 STAGE 1

From 1 July 2018

(Legislated)

STAGE 2

From 1 July 2020

(Bill awaits Royal Assent)

STAGE 3

From 1 July 2024

(Legislated)

Income threshold Tax rate Income threshold Tax rate Income threshold Tax rate Income threshold Tax rate
$18,200 19% $18,200 19% $18,200 19% $18,200 19%
$37,000 32.5% $37,000 32.5% $45,000 32.5% $45,000 30%
$87,000 37% $90,000 37% $120,000 37% $200,000 45%
$180,000 45% $180,000 45% $180,000 45%    

 Stimulus payments

The Government will provide two separate $250 economic support payments to eligible recipients of the following payments:

Pensioner Concession Card (PCC) holders (not in receipt of a primary income support payment), Commonwealth Seniors Health Card holders and eligible Veterans’ Affairs payment recipients and concession card holders will also receive the payments.

The first payment will be made from November 2020 and the second from early 2021.

The $250 cash payments are tax exempt and will not count as income support for social security purposes.

CGT exemption for granny flats

The Government will put in place a “targeted” CGT exemption for “granny flat” arrangements.

CGT will not apply to the creation, variation or termination of arrangements that provide accommodation for “older Australians or people with disabilities”.

The exemption will only apply to agreements that are entered into because of “family relationships or other personal ties” and will not apply to commercial rental arrangements.

The measure is proposed to commence from 1 July 2021.                                   

Paid Parental Leave (PPL)

The PPL work test period will be temporarily extended in response to the COVID-19 pandemic.

Under normal circumstances, parents must have worked 10 of the 13 months prior to the birth or adoption of their child to qualify for PPL (and for Dad and Partner Pay). The work test period is to be temporarily extended to 10 out of 20 months for births and adoptions that occur between 22 March 2020 and 31 March 2021.
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[av_heading heading=’Millennials prioritising home ownership’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kghp5gm5′ admin_preview_bg=”][/av_heading]

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The Millennial generation is the largest cohort prioritising home ownership over lifestyle aspirations, new data from Bankwest has found.

After analysing the savings patterns of nearly 1 million customers over the course of the pandemic, Bankwest compared the achievements of those who had set savings goals through the Savings Goal feature in the Bankwest mobile app, against those who had not.

The bank found that across all generations of goal-setters, Millennials (those aged between 23 and 38) were the cohort that were most focused on saving for a home at the expense of lifestyle savings, such as travel.

Breaking down the goal distributions by generation, more than a fifth of Millennials were saving for a home (21.18 per cent), the largest of any other generation.

This contributed to a 49.58 per cent increase in customers saving for a home over the six months March-August 2020. A similar increase was reported for those saving for a “big purchase” (49.58 per cent).

Overall, however, saving for a home was found to be the third most common savings goal across customers, behind “just saving” and “travel”, which held firm as the second most common goal despite ongoing restrictions.

The bank analysis also revealed the significant impact of goal setting on savings balances, after finding that the average savings balance of those with a savings goal grew by 41.77 per cent year-on-year to the end of September, compared with just 13.67 per cent for those without goals.

Bankwest chief customer officer Paul Vivian commented: “We’ve known for a while through the data we see that the stereotype of Millennials as carefree money wasters isn’t true, and this is another example.

“We’re in a period of unprecedented uncertainty, but also a period of low interest rates, and it seems like Millennials are seeing both as a reason to prioritise saving for a roof over their heads.

“What was also interesting was the impact on savings balances by simply having a goal, which makes sense, as not having a goal is like expecting to get somewhere without knowing the destination,” he concluded.

The Bankwest data echoes that released by ING, which found that a third of Millennials and a quarter of all Australians expect to buy a property in the next two years, with many having used the lockdown to accelerate their home ownership journey, according to ING research.
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[av_heading heading=’SMSF lender announces $600m mortgage-backed securitisation’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kghp65i3′ admin_preview_bg=”][/av_heading]

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Thinktank, a specialist commercial, residential and SMSF property finance provider, has completed its largest commercial mortgage-backed securitisation transaction of $600 million last week, bringing the total bonds now issued by the non-bank lender to $2 billion.

Thinktank chief executive Jonathan Street said the support demonstrated by existing and new institutional investors from both on and offshore is indicative of the strong, broad-based demand that has continued to develop for alternate asset-backed issuance.

The rated notes were placed across a total of 16 institutional investors, with both onshore and offshore accounts participating.

Real money investors represented 83 per cent of the total amount issued while banks accounted for 17 per cent. The transaction was 1.4x oversubscribed, representing bids in excess of $A850 million.

Thinktank said the pool of 1,035 first mortgage loans with an average size of $580,000 was composed of 27 per cent industrial properties, 16 per cent retail, 9 per cent office, 3 per cent mixed use commercial and 45 per cent residential; 86 per cent of properties were located in metro areas with 14 per cent in non-metro areas.

New South Wales was the most prominent state with 53 per cent, followed by Victoria with 28 per cent and Queensland with 11 per cent.

SMSF borrowers, it said, accounted for 27 per cent of loans while the weighted average loan to valuation ratio (LVR) was 66.5 per cent.

Just under 53 per cent of loans were to investors, with the balance to owner-occupiers. The vast majority of loans were on principal and interest repayment at 66 per cent, with only 34 per cent in an interest-only period. Less than 0.5 of a percentage point of borrowers had any form of adverse borrowing history.
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[av_heading heading=’Victoria grants tax and stamp duty relief post-bushfire crisis’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kghp6ps0′ admin_preview_bg=”][/av_heading]

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Businesses, families and individuals whose properties have been destroyed or substantially damaged by bushfires are set to receive ex-gratia relief for their 2020 land tax assessment, according to the state government.

Land tax will also be waived on eligible properties that are being used to provide free accommodation for people in need.

The government has also outlined that it will provide up to $55,000 in stamp duty relief for anyone who does not choose to rebuild in their local community and is considering a move elsewhere.

Fiona Nield, the Housing Industry Association’s Victorian executive director, said the group “fully supports the Victorian government getting behind those who have been displaced in this bushfire emergency”.

She said taxes such as stamp duty and land tax “are a major impediment to people buying or building a home, and by significantly reducing these fees, people will hopefully be able to return to a new house sooner and get their lives back on track with as little angst as is possible”.

“When you have to pick up and start again, the prospect can be made even more daunting by the costs and taxes you don’t think about,” the executive director commented.

The Housing Industry Association stated that it has already connected with Bushfire Recovery Victoria, with the group also looking forward to working closely with the state government over the coming weeks and months.

Ms Nield said: “At this time of great hardship for those affected, it’s the small things that alleviate financial suffering that count the most.

“This move will go some ways in alleviating some unnecessary worries.”
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[av_heading heading=’SMSFA calls to reinstate higher contribution cap for over 50s’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kghp74mi’ admin_preview_bg=”][/av_heading]

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In its submission for the 2019 federal budget, the association said the current concessional cap of $25,000 for all members was “restrictive” and limited individuals’ ability to save an adequate amount of super to be self-sufficient in retirement.

“The lack of a higher cap for older Australians fails to recognise that most people are able to make voluntary contributions to superannuation later in life when they have a greater financial capacity to do so,” the SMSFA said.

“Individuals traditionally make mortgage repayments and pay school fees and other immediate household expenses before considering the opportunity to build an adequate superannuation balance.”

The association referred to Rice Warner research showing that fund members contributed between $30,000 and $100,000 a year to super once they passed age 50, while those under 50 only contributed between $5,000 and $20,000 a year.

“The lead-up to retirement, beginning around age 50, is a critical time period for individuals to plan and grow their retirement savings,” the association said.

“These are the final years of full-time work and provide the greatest opportunity with an intersection of financial capability and proximity to retirement.”

Based on revenue estimates in the 2016–17 budget, the SMSFA estimated the cost of increasing the concessional contribution cap to $35,000 for those over 50 would be around $1 billion. However, the association suggested limiting this cap to those with under $500,000 in super, similarly to the recently introduced catch-up contribution measures.

Using the example of a 50-year-old fund member with $300,000 in super, the SMSFA said if they were able to contribute $10,000 more a year until age 65, the individual would retire with $184,000 more in their super, assuming a 6 per cent annual return.

“This would encourage individuals to contribute to their superannuation and, in the long term, reduce the reliance on the age pension,” the association said.
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Sources: The Advisor, Accountants Daily, SMSF Advisor and CFH Partners
Disclaimer: This is general information only and is subject to change at any time. Your complete financial situation will need to be assessed before acceptance of any proposal or product. The Content provided herein has been prepared for informational purposes only. The Content does not constitute tax, legal or accounting advice and should not be relied upon as such. You should seek tax, legal or accounting advice before acting or relying on any Content.

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