Nick Bruining: Start of new financial year heralds bucketful of changes — here’s how they affect you

The start of a new financial year usually heralds a bucketful of changes, but today is proving to be a monster with almost every Australian affected one way or another.

For those approaching or in retirement, it is time to take special note of what has changed at midnight.

The stage 3 tax cuts are now law and you’ll probably see the impact in your next pay packet. While the changes have received plenty of coverage, it’s worth noting the new minimum amounts you can earn before you pay tax.

For those under aged pension age, an increase in the minimum Medicare threshold, the lower income tax rates and the existing low income tax offset means that while yesterday, a person could earn up to $21,884 and pay no tax, today that figure rises to $22,575.

This is a significant number for people who use tax minimisation strategies such as salary sacrificing large amounts into superannuation.

Those contributions are subject to at least a 15 per cent contributions tax and salary sacrificing to the point where your income is below $22,575 is a waste of money. That’s because the 15 per cent contributions tax applies, no matter what personal income tax you pay.

For those over aged pension age, the seniors and pensioners tax offset, or SAPTO, applies, lifting the tax-free income threshold even higher.

For a single, the new threshold increases to $35,813 meaning that seniors below this income pay no tax. That also means you normally don’t need to lodge a tax return unless there are other activities going on like an investment property or a small business operation.

A quirk in the calculation system means that for couples, the tax-free threshold lifts from $29,783 yesterday to $31,888 each today. A senior couple could earn a combined $63,776 and pay no tax.

The recent lift in the minimum wage of 3.75 per cent takes effect today and that often flows through to a number of awards and other wage agreements in place.

Irrespective of the wage increase, all Australians will receive an extra 0.5 per cent of their ordinary time earnings paid into their super.

That lifts the compulsory employer superannuation payment to 11.5 per cent with the last increase to 12 per cent, due to kick in this time next year. Remember the $450 per month minimum was scrapped two years ago and the 11.5 per cent is payable from dollar one.

Those stashing the spare cash into super will benefit from a lift in the superannuation contribution caps which start today.

The annual concessional contribution cap rises to $30,000 from today. Concessional contributions are those contributions where someone is claiming a tax deduction and that includes the boss’ compulsory payments, salary-sacrificed amounts and contributions you make and claim a tax deduction for.

The increase in the concessional contribution cap flows through to the non-concessional cap. While yesterday that was $110,000 per annum, today it is $120,000. You can apply this new limit to the bring-forward rules where up to three years worth of non-concessional or $360,000 can be contributed in one hit.

And no, you can’t drop in an extra $30,000 if you fully utilised the $330,000 bring-forward trick within the past three years.

There’s also limitations on non-concessional contributions if you are approaching the transfer balance cap of $1.9 million. A nice problem to have.

For those on a part-pension, the indexation to the means test thresholds means that if nothing has changed since your last update, your pension is about to increase.

For someone on a means-tested pension, they will see an increase in their next payment.

If you are income tested, a single can expect an extra $4 a fortnight and couples, a combined $6 a fortnight.

The numbers are far more impressive for asset tested pensioners. A home-owning single should see a $36.75 per fortnight increase and couples, a combined $55.50.

The extra amount allowed for non-homeowners means a single’s asset tested pensioner will lift by $67.50 a fortnight and for couples a combined $85.50.

Remember that in all cases, you can’t exceed the maximum fortnightly pension payable which for a single, is $1,116.30 and for couples, $841.40 each.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association