The election of the Albanese Government marks a shift in attitude towards many economic, social and, most notably, environment issues. Tax and superannuation changes which were already legislated under the Morrison and Turnbull Governments have, however, been retained, providing some certainty as to tax relief and required super contributions in the immediate term. This includes the ‘stage 3’ tax cuts due to arrive on 1 July 2024 as well as the ongoing incremental increases to superannuation guarantee, both of which will remain on foot. This article focuses on some of the details of the tax and superannuation policies which will apply to income earners, as well as the new housing policy, the ‘Help to Buy Scheme’, aimed at hoisting first home buyers onto the property ladder.Nick Worth, Maddocks
By way of context, the Turnbull Government’s 2018-2019 Budget flagged an overhaul of the tax system effected through tax cuts in three stages. The first two stages centred on tax cuts to low and middle-income earners, where the Low and Middle Income Tax Offset (LMITO) was introduced in the 2019 financial year and an increase of the 37% marginal tax rate threshold from $87,000 to $90,000. The second stage was brought forward two years due to the pandemic and saw additional tax cuts to high income earners. The abolition of the LMITO has been locked in and there is no suggestion that this will be reversed by the newly elected government.
The Federal Government have committed to retaining the stage 3 tax cuts due to begin on 1 July 2024.
While subject to any policy flips, it is proposed the following will change:
This will create a larger tax bracket between $45,000 to $200,000, where those income earners will pay a 30% tax rate. Income earners taking in between $180,000 to $200,000 will no longer be subject to the 45% tax rate. As a result, there will be only three personal income marginal tax rates applying to Australian taxpayers.
There is no indication that the Federal Government will consider changes to property taxes. Negative gearing and the 50% capital gains tax discount will remain in place.
The super guarantee is set to continue its increase to 12% by 1 July 2025, with a 0.5% increase each year from the current rate of 10.5% in the 2023 financial year. The change was implemented in 2021 and began rising from a rate of 9.5% which had been in place since 1 July 2014. The Federal Government have indicated this will continue as legislated.
Depending on the wording of an employment contract, this means that for employees on ‘plus super’ salaries, there will be no difference to gross pay as the increased contribution would be outside the salary, which the employer would pay.
For employees on salaries inclusive of super, the contribution may form part of total remuneration and as a result, there may be a decrease in base salary.
All full-time, part-time and casual employees qualify for the super guarantee and extends to certain domestic workers and those under 18 years old who work a 30 hour week or more.
The rate represents the minimum amount employers must pay to avoid super guarantee charge. That charge is also applied to late payment or payment into the wrong fund.
The Federal Government have proposed to lower the age for making downsizing contributions to superannuation from over the age of 60 to 55. If or when this becomes law, it will mean that for Australian over the age of 55, up to $300,000 post-tax may be invested into superannuation using the proceeds of a home sale. For couples, the contribution may extend to up to $600,000.
The ‘Help to Buy Scheme’ is a housing policy initially proposed by the Labour Party before the election in May 2022 aimed at allowing more home buyers to enter the market early by providing financial assistance through a co-ownership arrangement with the government. It is targeted at low and modest income earners, a group which has seen the largest drop in home ownership in Australia.
Under the scheme, the government may make up to a 40% contribution of a new property, receiving a corresponding amount of equity. For existing homes, this figure sits at up to a 30% contribution. Individuals may purchase additional equity when it is possible to do so. Unlike other lenders, the contribution would be provided interest-free and without any fees.
The scheme would remove the high borrowing costs associated with purchasing a property with a small deposit. Moreover, with the government contribution forming part of the deposit, a buyer would not be required to obtain Lenders Mortgage Insurance.
Individuals need to meet the following criteria to be eligible:
It is envisaged that the scheme will reach 10,000 applicants in Australia who fit the above criteria.
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Tax & Structuring Practice Group.
You can read earlier ClearLaw articles on a range of topics, such as:
Daniel is a Senior Associate in the Maddocks Tax & Revenue team.Daniel advises extensively in the following areas:
His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Daniel worked at a Big Four Chartered Accounting Firm focusing on tax consulting for mergers and acquisitions.
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For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.