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Outlined below is all the latest news you 'need to know'.
The Federal Budget personal income tax changes are now law. The new rates are reflected on the Australian Taxation Office website.
Following the Federal Budget, Parliament has passed the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020. The Bill has received Royal Assent and is now law.
Starting from 1 July 2020, clients will not start paying 32.5% tax until their taxable income reaches $45,000 pa (previously $37,000). In addition, clients will not start paying 37% tax until their income reaches $120,000 pa instead of the previous threshold of $90,000 pa.
The low income tax offset increased from $445 to $700 from 1 July 2020.
This is discussed further in our October 2020 Q&A
Clients can earn approximately $22,810 without paying tax or any Medicare levy. Clients can earn up to $23,225 before paying tax but at this level of income may be liable for a small Medicare levy. The effective tax-free thresholds for clients entitled to the Senior and pensioner tax offset is even higher.
You may wish to explore the financial planning opportunities for your clients presented by the tax cuts, for example, establishing a super or non-super savings plan, acquiring insurance or reducing debt.
The IOOF TechConnect Team have developed a Salary Sacrifice Superannuation Calculator which can assist with calculating any tax savings by salary sacrificing to super. This calculator can be found on the IOOF Fast Fact Finder website.
Changes to personal income tax thresholds have been incorporated into the withholding schedules and apply to payments made from 13 October 2020. Clients will receive their entitlement to the reduced tax payable for the entire 2020/21 income year when they lodge their tax return.
Third and fourth Economic Support Payment to be paid from 30 November 2020
Treasury have released a new fact sheet, payments to support households, which confirms who is eligible and when they will be paid.
To be eligible for the third and fourth payment of $250, clients must be residing in Australia and be receiving one of several payments or holding a relevant concession card at
Please note the Social Services and Other Legislation Amendment (Coronavirus and Other Measures) Bill 2020which allows for the Economic Support Payments of $250 has been introduced into Parliament is yet to pass the House of Representatives and is not yet law.
Clients who are not yet receiving a relevant payment or do not have a concession card, though believe they may be eligible, should apply before 27 November 2020.
The wait continues - Extension of non-concessional contributions (NCC) bring-forward age to 66.
The Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 proposes to increase the age at which people can access the non-concessional bring-forward rules from age 64 to 66 from 1 July 2020.
Under current legislation, only clients who were age 64 or under at the start of the financial year are eligible to access the bring-forward rule. Furthermore, clients also need to have a total super balance of less than $1.4 million as at 30 June 2020 to access the full $300,000 bring-forward amount.
Parliament resumes on 9 November 2020.
The One Nation Party has inserted several amendments to the Bill, including increasing the concessional contribution cap and denying a deduction for certain COVID-19 withdrawals made then recontributed.
We will keep you informed of any developments on this.
If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.
DisclaimerThe information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.