30 Jul New laws and changes coming into effect on 1 July 2020 – What you need to know
The 2019/20 financial year is now firmly behind us. Going into the new financial year we will see changes to superannuation, tax concessions for small businesses, penalty rates, minimum wages and much more. The new set of changes will affect almost everyone including individuals, families, workers, business owners and even retirees. Some of these new changes also present opportunities. Here’s a summary of changes commencing from 1 July 2020 that may affect your finances, wages and tax.
Increase to work test age
From 1 July 2020, you can make voluntary contributions into super without having to meet a work test, up to the age of 67 – compared to the previous age limit of 65. The work test is an age-based requirement whereby you must be gainfully employed for at least 40 hours over 30 consecutive days during a financial year prior to contributing. Previously, the work test applied to members aged 65 and over. This change gives you two extra years to make additional voluntary contributions even if you are retired from the workforce as the work test now applies to members aged 67 and over.
Increase to age limit for spouse contributions
The government has extended the age limit to allow people up to age 75 to receive spouse contributions. Previously spouse contributions could not be made after the receiving spouse had reached 70 years of age. Importantly, if the receiving spouse is aged 67 or over they must satisfy the work test before being able to receive the contribution.
This may allow more people to access the spouse contribution offset. For a couple, if one of the members has assessable income, reportable fringe benefits and reportable employer contributions of less than $40,000, consider making a non-concessional contribution to the low-income spouse’s superannuation fund. The contributing spouse may be entitled to an 18 percent tax offset of the contribution, up to a maximum of $540 where the receiving spouse’s income is less than $37,000.
Fifty percent reduction to minimum pension payments
The minimum annual payment required for account-based pensions and market linked pensions has been reduced by 50 percent. Superannuation providers calculate the minimum annual payment required at 1 July each year. You can elect to withdraw the reduced 50 percent minimum pension or retain your previous drawdown amount.
Temporary early access to superannuation
If you are financially affected by COVID-19 and a citizen or permanent resident of Australia or New Zealand, you may be able to access up to $10,000 of your superannuation from 1 July 2020 until 24 September 2020. To be eligible at least one of the following circumstances must apply:
- you are unemployed;
- you are eligible to receive any of the following payments: JobSeeker Payment, Youth Allowance, Parenting Payment, Special Benefit and Farm Household Allowance;
- on or after 1 January 2020 either:
- you were made redundant;
- your working hours were reduced by 20 percent or more (including to zero);
- you were a sole trader and your business was suspended or there was a reduction in turnover of 20 percent or more (partners in a partnership are not eligible unless the partner satisfies any other of the eligibility).
Small business tax cuts
If you are a small business owner carrying on a business via a company structure you may be pleased to know that the tax rate for companies with turnover of less than $50 million decreased from 27.5 percent to 26 percent. If you are a sole trader, you will also benefit from the corporate tax cut as the unincorporated tax discount will increase from 8 percent to 13 percent. The unincorporated tax discount is a non-refundable tax offset available to individuals who are carrying on a business as a sole trader.
Extension of $150,000 instant asset write-off threshold
The $150,000 instant asset write-off threshold has been extended to 31 December 2020. Under the extension, businesses with aggregated turnover of less than $500 million will be able to claim an immediate deduction for the business portion of an asset first used or installed ready for use from 1 July to 31 December 2020, in the 2020-21 tax return.
Second economic support payment
The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. These payments intend to support households in managing the economic impact of COVID-19. The second payment is available to people who are eligible payment recipients and concession card holders from 10 July 2020.
Increase to minimum wages
The national minimum wages will be increased by 1.75 percent for the first full pay period on or after 1 July 2020. This will apply to all award wages. For anyone not covered by an award or an agreement, the new national minimum wage will be $753.89 per week or $19.84 per hour. Please note some awards will have a later commencement date of 1 November 2020 or 1 February 2021.
First Home Loan Deposit Scheme
A further 10,000 guarantees will become available to first home buyers from 1 July 2020. The First Home Loan Deposit Scheme was introduced on 1 January 2020 and aims to assist first home buyers to purchase their first home with as little as a five percent deposit without needing to pay for Lenders Mortgage Insurance. The scheme is limited to 10,000 loans per year and will only be made available to eligible first home buyers who satisfy a range of eligibility criteria, including prior property ownership test (i.e. they have never owned a home before) and an income test. The previous 10,000 allocation has been fully prescribed and a further 10,000 will be available from 1 July.
Parental Leave Pay changes
Previously, parents received Parental Leave Pay for a continuous block of up to 18 weeks (90 days). On or after 1 July 2020, Parental Leave Pay will include both a continuous paid period of up to 12 weeks (60 days) and 30 days Flexible Paid Parental Leave that can be taken any time before the child turns two.
Increase to Commonwealth penalty unit
The penalty unit amount has been increased to $222 from 1 July 2020 (from $210) and will apply to Commonwealth offences commenced on or after 1 July 2020. Certain penalties imposed for breaches of income tax, superannuation and corporations laws are expressed in terms of a “penalty unit” as defined in the Crimes Act 1914. The amount of the penalty unit is adjusted every three years in line with CPI (based on the 31 March quarter).
If you have any questions regarding this article, please do not hesitate to contact your Financial Adviser.
This is a publication of Australian Unity Personal Financial Services Limited ABN 26 098 725 145 (AUPFS), AFSL 234459. Its contents are current to the date of publication only, and whilst all care has been taken in its preparation, AUPFS accepts no liability for errors or omissions. This report is general in nature and does not take into account the objectives or circumstances of any particular individual or entity. It cannot be relied upon as a substitute for personal financial, taxation or legal advice.