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The Coalition’s election tax cut is on hold but it’s not all bad news

With the Coalition’s anticipated April budget package of $158 billion in tax cuts unlikely to start on July 1, 2019, can Australians look forward to any joy when it comes to tax?

We found a few changes that might help.

Australians will have to wait until 2020 for the Morrison Government’s tax changes but if legislation goes through, low and middle-income earners may get an offset payment.

As well there are some beneficial changes if you are lucky to qualify.

But watch out if you have a student loan, from July 1 the government has dropped the compulsory repayment threshold by more than $6,000 to $45,881 to capture more unpaid university and higher education loans.

Low and Middle Income Tax Offset (LMITO)

If you earn up to $90,000, the government has promised a LMITO of up to $530 to be paid at the end of the financial year and every year for the next three financial years.

The LMITO has been doubled to up to $1080 to match Labor’s election promise but this amount won’t be paid until parliament passes the April 2 budget tax cuts.

When it get through parliament, the second instalment will be paid on top of the $530 already paid.

Family Tax Benefit Part A

From July 2019, the Family Tax Benefit Part A higher income free amount will jump from $94,316 to $98,988.

The base rate of Family Tax Benefit Part A will reduce by 30 cents for every dollar earned over this amount.

The Work Bonus is increasing

If you work while on the age pension, you will be able to earn more from work before your pension reduces.

This will be helpful for pensioners who do some part-time, seasonal or irregular work.

The income you are allowed to earn for the age pension income test is increasing from $250 per week to $300 from July 1. The most you can accrue will change from $6500 to $7800.

university student loans hecs help student debt

Lower income thresholds for repaying student loans

The screws are being tightened on student loans. If you are earning $45,881 and more, you will be required to pay off your higher education loans. This is way down from the current rate of $51,957.

The lower earnings rate will kick in from July 1, 2019, with a 1% repayment rate and a further 17 thresholds and repayment rates, up to a top threshold of $134,573 at which 10% of income is repayable.

HELP repayment thresholds will also be indexed using the Consumer Price Index (CPI) instead of Average Weekly Earnings (AWE) from July 1.

Also, Student Financial Supplement Scheme (SFSS) debts will be repaid after HELP debts are discharged.

Currently, SFSS debts are paid concurrently with HELP debts. The repayment thresholds for SFSS will also be brought into line with the HELP repayment thresholds too, instead of the current three-tier repayment threshold.

More from Pension Loans Scheme

It will be easier for pensioners who own their own home to borrow from the Government under the changes to the Pension Loans Scheme. Pensioners will be able to borrow 50% more from July 1.

Cheaper than the interest rates payable on reverse mortgages, the Pension Loans Scheme (PLS) was introduced at the same time as the pensions’ assets test in 1985, primarily to assist part-rate age asset rich, cash poor pensioners.

The scheme is available to people who own real estate in Australia with enough equity to secure the loan. You or your partner must be age pension age or older and there are other conditions too.

From July 1, 2019, maximum rate pension recipients will also be able to access the PLS. Plus, the amount you can get per fortnight will increase from 100% to 150% of the maximum fortnightly pension rate.

This means you can now get up to 1.5 times the maximum rate of pension each fortnight. The loan is made as a stream of fortnightly top ups of pension payments.

The eligible pensions for the PLS are now the age pension, bereavement allowance, carer payment, disability support pension, widow B pension and wife pension.

You can apply through your myGov account and check with Department of Human Services for more information.

Interest continues to accrue until the loan is repaid and increases the amount to be repaid. The longer an individual takes to repay the outstanding loan balance, the more an individual will have to repay over the life of the loan.

Repayments can be made at any time or the debt can be left, including the accrued interest, to be recovered from the person’s estate.

It is up to the borrower to manage all the costs associated with establishing, changing and finalising the loan, such as legal and solicitor costs.

Written by Susan Hely

Susan Hely

Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She’s also author of the best-selling book Women and Money.

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  1. As I’ve always said. They’re a bunch of w*****g, f*****g liars. They promise the world until they get elected. All sides are the same in the end. They’re only in it for themselves. People shouldn’t vote for any of them. I wonder what would happen if they held an election and nobody voted.

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