Balance the Budget and budget the balance

There weren’t any big-ticket items but that was because there isn’t much money to play with and with a federal election a possibility before May next year, the Government and the Opposition in its Budget reply had to appear to be concerned about reducing our debt as well.

More of us voters are becoming concerned that we are still running yearly deficits. That means the Government is paying off debt and we are borrowing more just to stay afloat.

That’s the same as an individual borrowing more money than they already have because their income isn’t enough to meet their living costs and existing loan repayments.

It is only when the Government collects more tax revenue than they are paying out in benefits, services etc that we will begin to reduce Credit Card Australia.

It is this ground level concern that forced the pollies to tighten the reigns this year, which is a good thing. We probably all, in some way, approach the announcements with a “what’s in it for me?”. Some of the goodies announced (not yet LAW) are outlined below.

Firstly, the government will introduce tax cuts in three stages from July 1, this year through to the year 2024-25.

It starts with a new tax offset for low and middle income earners, which cuts out when an individual’s income reaches $125,333. The maximum offset is $530 in the form of a lump sum after you complete your tax return.

In a great result for small business, the instant asset write-off of $20,000 will continue for the next financial year. This proved very popular and it encourages small businesses to spend money.

Gerry Harvey apparently isn’t the only one that likes this incentive.

In one of the recent past Budgets it was announced the government would remove the work test for eligibility to contribute to superannuation for people aged 65-74. They later removed this but have now announced that the work test will be removed for those whose super balance is less than $300,000.

They will be able to make contributions for 12 months from the end of the financial year when they last satisfied the work test. This is due to commence from July 1, 2019.

As an example, say Bill and Mary (both with super balances below $300,000) continued working fulltime until they were both aged 66 and retired in October 2019. 

They would have met the work test for the 2019-20 financial year and could potentially contribute up to $25,000 as a concessional contribution, depending on what their employer had contributed, and also contribute $100,000 as a non-concessional contribution that financial year.

Additionally, under the new rule, in the 2020-21 financial year they could also contribute up to $100,000 each as a non-concessional contribution.

Not everyone has the cash to do this but if you do, it allows more funds to enter the low tax superannuation environment.

The Age Pension Work Bonus will be increased with non-assessable fortnightly earnings (from work) going from $250-$300. 

Self-employed pensioners will be able to benefit from this incentive.  This is positive encouragement for partially retired people to still earn a certain amount of income that won’t affect their age pension under the income test.

As Budgets come and go, some of the announcements are implemented but in recent times, more and more have been knocked back because the government of the day hasn’t held power in the Senate and the opposition (both sides) have blocked key elements.

We have had many enquiries from people near or in retirement in recent months who are confused by what they can or should do and also what they shouldn’t be doing. 

If you have any questions or want some guidance send me an email, like many others have done.

And finally, a goodie but an oldie from Unknown: “After the government takes enough to balance the budget, the taxpayer has the job of budgeting the balance.”

 Brian Mooney is a Certified Financial Planner and Authorised Representative of Logiro. Email: brianm@logiro.com