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:

• the national minimum wage has increased to $740.80 per 38 hour week or $19.49 per hour;
• modern award minimum wages have increased 3% (weekly wages rounded to the nearest 10 cents).

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.

The new rates and thresholds pertain to the following study and training loans:

• Higher Education Loan Program (HELP),
• VET Student Loan (VSL),
• Student Financial Supplement Scheme (SFSS),
• Student Start-up Loan (SSL),
• ABSTUDY Student Start-up Loan (ABSTUDY SSL),
• Trade Support Loan (TSL).

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:

• the income test assesses 60% of all income stream payments as income;
• the assets test assesses 60% of the nominal purchase price until the person reaches the life expectancy of a 65-year-old male (currently age 84) – or a minimum of five years – and then 30% of the purchase price for the rest of the person’s life.

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:

• Those eligible for the PLS include people of Age Pension age or Service Pension age. Their partners may also be eligible if they are eligible for pensions including Carer Payment, Disability Support Pension or War Widow Income Support Supplement. Applicants must own (or formally control) an Australian Property over which the loan can be secured.
• Those receiving the maximum rate of pension/payment can now access the PLS to ‘top-up’ their payments to 150%.
• Those who meet the eligibility criteria and have a reduced rate of income support (or Nil rate due to either the Asset or Income test, not both), now have their PLS access increased from 100% to 150%.

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:

• the fortnightly Work Bonus income concession has increased to $300,
• the income concession bank has increased to $7,800,
• the definition of income eligible for the Work Bonus has been expanded to include income earned from gainful work that involves personal exertion, for example, self-employment.

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:

• ≤$37,000, $255
• from $37,001 to $48,000, $255 plus 7.5 cents per dollar above $37,000
• from $48,001 to $90,000, $1,080
• from $90,001 to $126,000, $1,080 minus 3 cents per dollar above $90,000

2. From 1 July 2022:

• instead of increasing from $37,000 to $41,000, the top threshold of the 19% personal income tax bracket will increase to $45,000
• the low income tax offset (LITO) will increase from $645 to $700 (and decrease at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000, and decrease at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667)

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:

• ≤$18,200, nil tax
• from $18,201 to $45,000, nil plus 19% for each dollar over $18,200
• from $45,001 to $200,000, $5,092 plus 30% for each dollar over $45,000
• $200,001+, $51,591 plus 45% for each dollar over $200,000