2019 Federal Budget overview: Super, tax and related announcements

On 2 April 2019, Josh Frydenberg announced his first Federal Budget as Treasurer.

The coalition’s key message was that they had returned Australia’s Budget to surplus (or rather will do from next financial year) through responsible Budget management. The Treasurer presented measures to further strengthen the economy (for example, spending on infrastructure and equipping more workers with skills) and somewhat inevitably in an election year, offered up generous tax cuts for both individuals and small businesses.

There were only a handful of policies that directly relate to superannuation, most of which make it easier for older Australians to make super contributions.

There were some other announcements that will benefit older Australians through a one-off energy payment, extending the age that super contributions can be made, and expanding support for care.

The Treasurer pledged some measures that should filter through to all Australians, confirming again that the government will support all 76 recommendations from the Royal Commission, as well as significantly increase the funding for both the APRA and ASIC to police those recommendations.

It’s important to remember that with a federal election looming, some of these policies may never see the light of day. Shadow Treasurer Chris Bowen told the ABC that if Labor win the election they will issue a new budget before next May, “in the third quarter of (this) year”.

The main announcements affecting tax, superannuation and older Australians are outlined below.

See also Penny Pryor’s take on the Federal Budget Economic Outlook and our coverage of Bill Shorten’s Budget reply.

Income tax cuts

The government announced an expansion (or “enhancement”) of the Personal Income Tax Plan tax relief announced by Scott Morrison in last year’s Federal Budget.

An immediate increase in the Low and Middle Income Tax Offset (LMITO)

The new Low and Middle Income Tax Offset (LMITO) will increase from this financial year to a new maximum of $1,080 (from $530). The base amount will increase from $200 to $255 for 2018/2019 and for the next three income years.

Treasury predicts that the LMITO increase will assist over 10 million Australians, with about 4.5 million taxpayers with taxable incomes between $48,000 and $90,000 receiving the full $1,080 reduction in tax for 2018-19.

Around 2.3 million Australians with taxable incomes less than $37,000 will receive an offset of up to $255. Learn more about how LMITO works.

An increase in the low income tax threshold (LITO)

The low income tax threshold (LITO) will increase from $645 to $700 from the 2022-23 financial year. Learn more about how LITO works.

An increase in the top threshold for the 19% tax bracket

The top threshold of the 19% tax bracket will increase from $41,000 to $45,000 from the 2022-23 financial year. Treasury estimates this will stop around 590,000 taxpayers from entering the 32.5% tax bracket in 2022-23. Find out more about the income tax cuts announced in last year’s Budget.

A reduction in the 32.5% tax bracket to 30%

Last year Scott Morrison announced the abolition of the 37% tax bracket, thereby expanding the 32.5% tax bracket for taxable incomes between $45,000 and $200,000. In this year’s Federal Budget, Josh Frydenberg announced that this tax bracket will be reduced from 32.5% to 30% from the 2024-25 financial year. It’s projected that 94% of taxpayers will face a marginal tax rate no higher than 30% from then.

The Treasurer acknowledged that Australia currently has relatively high rates of tax compared with other countries. Australia’s top marginal tax rate cuts in at around 2.2 times average full-time earnings, compared with 4 times in Canada and the UK, and 8 times in the US.

The following table illustrates how the income tax rates are scheduled to change over the coming years.

Tax rate	2017-18	2018-19 to 2021-22	2022-23 to 2023-24
0% (tax-free)	$0 – $18,200	$0 – $18,200	$0 – $18,200
19%	$18,201 – $37,000	$18,201 – $37,000	$18,201 – $45,000
32.5%	$37,001 – $87,000	$37,001 – $90,000	$45,001 – $120,000
37%	$87,001 – $180,000	$90,001 – $180,000	$120,001 – $180,000
45%	Over $180,000	Over $180,000	Over $180,000
LMITO	N/A	Up to $1,080	N/A
LITO	Up to $445	Up to $445	Up to $700

The table below provides income tax rates from 2024-25 onwards.

Tax rate	From 2024-25
0% (tax-free)	$0 – $18,200
19%	$18,201 – $45,000
30%	$45,001 – $200,000
45%	Over $200,000
LITO	Up to $700

The following table shows the cumulative tax relief for various income levels for future financial years.

Taxable income	$30,000	$50,000	$80,000	$90,000	$120,000	$140,000	$160,000	$200,000
2018/2019	$255	$1,080	$1,080	$1,215	$315	$135	$135	$135
2019-2020	$510	$2,160	$2,160	$2,430	$630	$270	$270	$270
2020/2021	$765	$3,240	$3,240	$3,645	$945	$405	$405	$405
2021/2022	$1,020	$4,320	$4,320	$4,860	$1,260	$540	$540	$540
2022/2023	$1,275	$5,400	$5,400	$6,075	$3,825	$3,105	$3,105	$3,105
2023/2024	$1,530	$6,480	$6,480	$7,290	$6,390	$5,670	$5,670	$5,670
2024/2025	$1,785	$7,685	$8,435	$9,630	$10,830	$11,510	$12,910	$17,310

Tax boosts for small and medium-sized businesses were also announced, including a tax rate reduction from 27.5% to 25% (from 2021-22), and an immediate increase in the instant asset write-off from $25,000 to $30,000.