1 July 2020: Change in the new financial year
Change has the potential to impact our financial situation, goals and objectives. When this occurs, it’s important to assess the relevance and potential impact—then plan and act accordingly.
A new financial year can mean change—thresholds and rates can increase (or decrease), and legislation can take effect.
Below is a summary of the most notable changes occurring from 1 July 2020 across superannuation, employment, social security and taxation. For a full write up of all changes, please see the original article posted on The Wealth Mentoring Group’s Financial Knowledge Centre on 14 July 2020.
Contribution eligibility age
From 1 July 2020, the cut-off age for spouse contributions has increased to 75 (previously 70).
And, from 1 July 2020, the age at which the work test starts to apply for voluntary concessional and non-concessional super contributions has increased to 67 (previously 65).
Please note: There is a Bill before the parliament to increase, from age 64 to 66, the age at which an individual can be as at 1 July of the current financial year, to make up to three years of non-concessional contributions under the bring-forward rule. The Bill has a current proposed commencement date of 1 July 2020. If legislated, this date (backdated), may or may not stay the same.
COVID-19 early release of super
From 1 July 2020 (until 24 September 2020), under the temporary condition of release, COVID-19 early release of super, eligible individuals can apply to the ATO to access up to $10,000 of their super, tax-free.
Government co-contribution thresholds
From 1 July 2020, the lower and higher income thresholds for the Government co-contribution have increased to $39,837 (previously $38,564) and $54,837 (previously $53,564), respectively.
The maximum Government co-contribution remains at $500 (reduces by 3.333 cents for each $1 of income earned over $39,837, and cuts out when an individual’s income reaches $54,837).
Maximum super contribution base
From 1 July 2020, the maximum super contribution base has increased to $57,090 per quarter (previously $55,270), which equates to $5,423.55 Super Guarantee per quarter ($21,694.20 Super Guarantee annualised).
Minimum annual pension payment requirement
From 1 July 2020, the temporary reduction in the minimum annual pension payment requirement for retirement income streams continues from the previous financial year.
Work test exemption age
From 1 July 2020, the age in which the work test exemption can be utilised to make voluntary super contributions has increased to aged 67-74 (previously aged 65-74).
National minimum wage and modern award minimum wages
There have been increases in the national minimum wages, and the modern award minimum wages, however different operative dates have been determined for different groups of modern awards.
Study and training loan repayment thresholds and rates
From 1 July 2020, there are new study and training loan repayment income thresholds and rates.
Age Pension thresholds
From 1 July 2020, the income and assets thresholds for the corresponding income test and assets test for the Age Pension have increased.
From 1 July 2020, the deeming thresholds have increased:
- For singles. Amounts up to $53,000 (previously $51,800) are deemed to earn 0.25% (the lower deeming rate). And, the portion over $53,000 is deemed to earn 2.25% (the higher deeming rate).
- For couples (combined). Amounts up to $88,000 (previously $86,200) are deemed to earn 0.25% (the lower deeming rate). And, the portion over $88,000 is deemed to earn 2.25% (the higher deeming rate).
Early Childhood Education and Care Relief Package
From 13 July 2020, the Child Care Subsidy and Additional Child Care Subsidy have been reinstated—along with new transition measures to support the child care sector and parents as they move back to the subsidies.
For example, from 13 July 2020 to 4 October 2020, families can access up to 100 hours of subsidised child care, per child, per fortnight, where they now have a reduced number of hours of work, training, study or other recognised activity, compared to their activity level prior to the COVID-19 pandemic.
Base rate entity company tax rate
From 1 July 2020, the company tax rate for base rate entities has decreased from 27.5% to 26%.
The company tax rate for all other companies remains at 30%.
Instant asset write-off
From 1 July 2020, the instant asset write-off threshold of $150,000 (for businesses with aggregated annual turnover less than $500 million) was due to revert back to $1,000 (for businesses with aggregated annual turnover less than $10 million). However, this reversion has been pushed back until 1 January 2021.
Tax-free part of genuine redundancy payments and early retirement scheme payments
From 1 July 2020, the tax-free part of genuine redundancy payments and early retirement scheme payments have increased to $10,989 (previously $10,638) for the base limit and $5,496 (previously $5,320) for each complete year of service.
Temporary shortcut deduction method for work-related home office expenses
From 1 July 2020, the temporary shortcut deduction method for work-related home office expenses was due to cease: ‘Total number of hours worked from home between 1 March and 30 June 2020 × $0.80’. However, this cessation has been pushed back until 1 October 2020: ‘Total number of hours worked from home between 1 July 2020 and 30 September 2020 × $0.80’.
If you would like to discuss anything mentioned above, and its relevance to your financial situation, goals and objectives, please contact us.