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.

Given this, it’s important to note a new financial year can often bring about change. For example, existing rates and thresholds can increase (or decrease), and new legislation can take effect.

Below is information on change occurring from 1 July 2020 across taxation, superannuation, employment, and social security.

 

Taxation

Base rate entity company tax rate

From 1 July 2020, the company tax rate for base rate entities (aggregated turnover of less than $50 million, and 80% or less of assessable income is base rate entity passive income) has decreased to 26% (previously 27.5%).

The company tax rate for all other companies remains at 30%.

For more information on company tax rates, please click here.

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.

For more information on the instant asset write-off, please click here.

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.

For more information on genuine redundancy and early retirement scheme payments, please click here.

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 2020 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’.

For more information on deductions and work-related expenses, please click here.

Unincorporated small business tax offset

From 1 July 2020, the unincorporated small business tax offset for small business entities (aggregated turnover of $5 million) has increased to 13% (previously 8%)—up to a maximum tax offset of $1,000.

For more information on the unincorporated small business tax offset, please click here.

 

Superannuation

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.

For more information on spouse contributions, the work test, and the bring-forward rule, please click here.

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.

For more information on the COVID-19 early release of super, please click here.

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).

For more information on the Government co-contribution, please click here.

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).

For more information on the maximum super contribution base, please click here.

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.

The minimum annual pension payment requirement in relation to account-based pensions and transition to retirement pensions is contained within the below table.

 
 

Minimum annual pension payment requirement:

Account-based pensions and transition to retirement pensions

 

AgePrior to 2019/20 financial year,

minimum annual pension payment requirement

2019/20 and 2020/21 financial years,

minimum annual pension payment requirement

55-644%2%
65-745%2.5%
75-796%3%
80-847%3.5%
85-899%4.5%
90-9411%5.5%
95+14%7%

For more information on the minimum annual pension payment, please click here.

Low rate cap amount and untaxed-plan cap amount

From 1 July 2020, the low rate cap amount has increased to $215,000 (previously $210,000). Please note: The low-rate cap amount is reduced by any amount previously applied to the low-rate threshold.

In a similar vein to above, the untaxed plan cap amount has increased to $1,565,000 (previously $1,515,000).

For more information on the low rate cap amount, please click here.

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).

For more information on the work test exemption, please click here.

 

Employment

National minimum wage and modern award minimum wages

From 1 July 2020, the national minimum wage has increased to $753.80 per 38 hour week (or $19.84 per hour)—an increase of 1.75%, which equates to an increase of $13 per week to the weekly rate (or $0.35 per hour to the hourly rate).

Also, the modern award minimum wages have increased by 1.75% (weekly wages rounded to the nearest 10 cents). However, different operative dates have been determined for different groups of modern awards:

  • Group 1 Awards, operative from 1 July 2020:
    • The modern awards in Group 1 cover industries which have been less affected by the pandemic than those covered in Groups 2 and 3, and includes modern awards applying to ‘frontline’ health workers, teachers and childcare workers and employees engaged in other essential services, who have continued working throughout the pandemic, to keep the community safe; to protect the vulnerable and those at risk; and to keep the economy functioning” (Fair Work Commission, 2020*).
    • Examples of listed modern awards in Group 1 include, but are not limited to: Ambulance and Patient Transport Industry Award 2020Aged Care Award 2010Banking, Finance and Insurance Award 2020Children’s Services Award 2010Cleaning Services Award 2020Educational Services (Teachers) Award 2010Electrical Power Industry Award 2020Nurses Award 2010; Pharmacy Industry Award 2020; and, Water Industry Award 2020.
  • Group 2 Awards, operative from 1 November 2020:
    • The modern awards in Group 2 cover industry sectors adversely impacted by the pandemic, but not to the same extent as the sectors covered by the Group 3 awards”. (Fair Work Commission, 2020*).
    • Examples of listed modern awards in Group 2 include, but are not limited to: Animal Care and Veterinary Services Award 2020Building and Construction General On-site Award 2010Car Parking Award 2020; Educational Services (Post-Secondary Education) Award 2020Food, Beverage and Tobacco Manufacturing Award 2010Higher Education Industry-Academic Staff-Award 2020; and, Passenger Vehicle Transportation Award 2020.
  • Group 3 Awards, operative from 1 February 2021:
    • The modern awards in Group 3 cover the industry sectors which have been most adversely affected by the pandemic”. (Fair Work Commission, 2020*).
    • Examples of listed modern awards in Group 3 include, but are not limited to: Amusement, Events and Recreation Award 2020Fast Food Industry Award 2010Fitness Industry Award 2010General Retail Industry Award 2010Hospitality Industry (General) Award 2020Live Performance Award 2010Restaurant Industry Award 2020Registered and Licensed Clubs Award 2010Sporting Organisations Award 2020; and, Wine Industry Award 2010.

Please note: These increases take effect from the start of the first full pay period that starts on or after 1 July 2020, 1 November 2020, and 1 February 2021, respectively.

Study and training loan repayment thresholds and rates

From 1 July 2020, there are new study and training loan repayment income thresholds and rates.

The new income thresholds and rates apply to the Higher Education Loan Program, VET Student Loan, Student Financial Supplement Scheme, Student Start-up Loan, ABSTUDY Student Start-up Loan, and Trade Support Loan.

The new income thresholds and rates are contained within the below table.

 
 

Study and training loan repayment: Thresholds and rates

 

Repayment incomeRepayment rateRepayment incomeRepayment rate
< $46,620Nil$85,793 – $90,9396.0%
$46,620 – $53,8261.0%$90,940 – $96,3966.5%
$53,827 – $57,0552.0%$96,397 – $102,1797.0%
$57,056 – $60,4792.5%$102,180 – $108,3097.5%
$60,480 – $64,1083.0%$108,310 – $114,7078.0%
$64,109 – $67,9543.5%$114,708 – $121,6988.5%
$67,955 – $72,0314.0%$121,699 – $128,9999.0%
$72,032 – $76,3544.5%$129,000 – $136,7399.5%
$76,355 – $80,9355.0%$136,740+10%
$80,936 – $85,7925.5% 

For more information on study and training, please click here.

 

Social security

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.

The new income and asset thresholds are contained within the below tables.

 
 

Income test for Age Pension: Income thresholds*

 

Family SituationHomeowners and Non-homeowners
For full Age Pension (per fortnight)For part Age Pension (per fortnight)
Single< $178 (previously $174)< $2,066.60 (previously $2,062.60)
Couple (combined)< $316 (previously $308)< $3,163.20 (previously $3,155.20)
Illness separated couple (combined)< $316 (previously $308)< $4,093.20 (previously $4,085.20)

*These thresholds may be higher if Rent Assistance is paid with your pension.

*Some assets are deemed to earn income, whilst there are special rules for other types of income. Furthermore, the Work Bonus may be applicable if you are earning income from work.

*Income over these amounts reduces the rate of pension payable by 50 cents in the dollar (single), 25 cents in the dollar each (for couples).

 
 

Assets test for full Age Pension: Assets thresholds*

 

Family SituationHomeownersNon-homeowners
Single< $268,000 (previously $263,250)< $482,500 (previously $473,750)
Couple (combined)< $401,500 (previously $394,500)< $616,000 (previously $605,000)
Illness separated couple (combined)< $401,500 (previously $394,500)< $616,000 (previously $605,000)
One partner eligible (combined assets)< $401,500 (previously $394,500)< $616,000 (previously $605,000)

*These thresholds may be higher if Rent Assistance is paid with your pension.

*Some assets are deemed to earn income, while certain assets are not included in the assets test.

*Assets over these amounts reduces the rate of pension payable by $3 per fortnight for every $1,000 above the amount (single and couple combined).

 
 

Assets test for part Age Pension: Assets thresholds*

 

Family SituationHomeownersNon-homeowners
Single< $583,000 (previously $578,250)< $797,500 (previously $788,750)
Couple (combined)< $876,500 (previously $869,500)< $1,091,000 (previously $1,080,000)
Illness separated couple (combined)< $1,031,500 (previously $1,024,500)< $1,246,000 (previously $1,235,000)
One partner eligible (combined assets)< $876,500 (previously $869,500)< $1,091,000 (previously $1,080,000)

*These thresholds may be higher if Rent Assistance is paid with your pension.

*Some assets are deemed to earn income, while certain assets are not included in the assets test.

*Assets over these amounts reduces the rate of pension payable by $3 per fortnight for every $1,000 above the amount (single and couple combined).

For more information on the Age Pension, please click here.

Deeming thresholds

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).

For more information on deeming, please click here.

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.

For more information on the Child Care Subsidy, please click here.

 

Other

First Home Loan Deposit Scheme guaranteed loans availability

From 1 July 2020 (until 30 June 2021), the First Home Loan Deposit Scheme will support up to 10,000 guaranteed loans, which will be available to eligible individuals/couples through participating lenders.

For more information on the First Home Loan Deposit Scheme, please click here.

 

Moving forward

If you would like to discuss anything mentioned above, and its relevance to your financial situation, goals and objectives, please contact us.

 

*Fair Work Commission. (2020). Annual Wage Review 2019-20 decision.