2018 Federal Budget Summary

Tuesday night’s Federal Budget contained a variety of measures across superannuation, taxation, social security and aged care that will affect many of our clients and their financial plans.

Please note that these proposals are not yet legislated, and as always, the team at AGS Financial Group are well placed to advise you on your strategic options as these proposals progress.

Key elements of the budget include:

Personal Taxation

7-year personal tax plan

A key component of this year’s budget is the three-stage package of personal income tax cuts. Stage 1 is slated to commence next financial year, with both a new Low and Middle Income Tax Offset (LMITO) introduced to provide a tax cut of up to a maximum of $530 per year for those earning up to $125,333, along with an increase of the top threshold for the 32.5% tax bracket from $87,000 to $90,000. Stages 2 (July 2022) and 3 (July 2024) will see an increase to the top threshold of the 19% bracket, and then the 32.5% bracket (effectively removing the 37% bracket entirely) as per the table below.

Marginal Tax Rate (%)

Thresholds 2017/18


Thresholds 2018/19


Thresholds 2024/25



0 – 18,200

0 – 18,200

0 – 18,200


18,201 – 37,000

18,201 – 37,000

18,201 – 41,000


37,001 – 87,000

37,001 – 90,000

41,001 – 200,000


87,001 – 180,000

90,001 – 180,000






Note: excludes Medicare (2%), which the budget is now retaining at 2% rather than increasing to 2.5%.

Removing Deductions for Vacant Land

From 1 July 2019, tax deductions will not be allowed for expenses associated with holding vacant land, such as interest costs related to holding vacant land where the land is not genuinely held for the purpose of earning assessable income.

Superannuation & Retirement

SMSF changes

The government has proposed to increase the number of members permitted in a SMSF from 4 to 6.

A three-yearly audit cycle is proposed for funds with a good compliance record and history of timely lodgements.

Work test changes for recent retirees

Currently those aged 65 to 74 must meet a work test in order to be eligible to contribute to super. From 1 July 2019 the government proposes this requirement be waived for people with super balances under $300,000 for the financial year after they last met the work test, allowing them time to get their retirement plans in order.

Changes to insurance within super

From 1 July 2019, the government is proposing to change life insurance inside super to an opt-in basis for:

  • People with super balances of less than $6,000, or
  • People who are under 25, or
  • People whose accounts haven’t received a contribution in 13 months.

Protecting low super balances and banning exit fees

The government is proposing to ban exit fees when people decide to leave a super fund from 1 July 2019. It’s also been proposed that a 3% annual cap be introduced on fees such as administration and investment fees for super accounts with balances of less than $6,000.

New Retirement Income Options

The superannuation law will be amended to introduce a retirement covenant that will require superannuation trustees to formulate a retirement income strategy for superannuation fund members. Trustees will be required to offer Comprehensive Income Products for Retirement (CIPRs), which aim to provide individuals with income for life.

Social Security & Aged Care

Expanding the Pension Loan Scheme

The Pension Loan Scheme is basically a reverse mortgage scheme administered by Centrelink, which allows those receiving a part Age Pension and those who aren’t receiving an Age Pension payment (because they’ve failed either the income or the assets test) to be paid a ‘top up’ loan to ensure they receive the equivalent of the full Age Pension amount.

The government is proposing expanding eligibility for the scheme to all Australians of Age Pension age, including those on the full Age Pension and self-funded retirees, from 1 July 2019, with a combined maximum of 150% of the Age Pension.

Expanding the Pension

The government is proposing to increase the work bonus for employees who have reached their Age Pension age to $300 per fortnight, up from $250 per fortnight, from 1 July 2019.

Introduction of means testing of new income streams

Also from 1 July 2019, the government is proposing to introduce new means testing rules for new pooled lifetime income streams, including new lifetime annuities and new deferred lifetime annuities.

Aged Care

14,000 high level home care packages plus an extra 13,500 residential aged care places announced.

Small & Medium Business

Extending Immediate Deductibility

The government is extending the accelerated depreciation rules for assets less than $20,000 by another year (to 30 June 2019).


Naturally, as these measures become law, we are on hand to assist you with understanding and responding to the changes. As always, please contact us should you require any advice or assistance with your plans.


Published : 08 May 2018

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