Brief analysis of the 2018 Budget announcements affecting key financial planning areas of personal tax, superannuation, and life & disability insurances.
Virtually all taxpayers should receive a tax cut from July 2018 under changes proposed in the Budget. These cuts range from $135 – $665 pa depending on income level. Those on incomes between $50K – $100K get the biggest cuts.
The Budget also includes proposals for additional future tax cuts starting in 2022 and implemented progressively over the subsequent 3 years. If fully implemented, these cuts will provide greatest benefit to higher income earners, with those on $200K+ eventually receiving the biggest tax cut of $7,225 pa. Given there will several years of short term politics prior to these longer term tax cuts being implemented, it would be optimistic to count on them at this stage.
There were no major changes in relation to superannuation in this Budget. This will be a relief to many, after the high number of changes over recent years!
There were a few minor changes designed to minimise lost super accounts, reduce excessive costs on small balances, and make it easier to consolidate super into one fund. These are unlikely to have much effect on people who already have their super arrangements under control, but should provide benefits to those who have not kept track of their super and have multiple small accounts.
Life & Disability Insurances
The Budget contains a proposal to compulsorily cancel insurances held in superannuation for accounts with a balance less than $6,000, and inactive accounts regardless of balance size, unless the member actively chooses to retain that insurance. The intention is to stop people paying for insurance acquired by default through their superannuation, which they may not need or didn’t realise they had.
However there is a danger that this process will lead to some people inadvertently losing insurance they do actually need. This makes it even more important to thoroughly read all superannuation and insurance documents sent to you and/or get ongoing professional assistance with these matters.
At this stage all these Budget announcements are proposals only, and are subject to being legislated by parliament. Clear passage to legislation can be far from certain when the government doesn’t control the Senate, as is currently the case.
If you would like to discuss the potential impact from the 2018 Budget on your financial plan, please get in touch.