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How 1 July could affect your budget

11 min read
26 Jun 2020

Would you believe we’re almost halfway through 2020?

Before you consider dragging out the Christmas tree, let’s focus on certain upcoming changes that could affect your household budget.

At the end of June and the start of July, the Australian Government and several regulatory authorities roll out a host of price changes, rebates and rules. It’s vital you’re updated, so you can:

  1. maximise your savings
  2. be aware of extra potential costs in the new financial year.

Our spokesperson Abigail Koch encourages all Australians to be aware of changes that happen at the start of July.

‘Almost every Australian will see their household finances impacted by the upcoming 1 July changes, which is why it’s so important that people are proactive as we head into the new financial year.’

For example, you might be able to save on your electricity bills, by re-comparing to see if there is now a plan that suits you better. The beginning of the new financial year is also a good time to consider whether you may be faced with a bigger bill at tax time if you don’t have private health hospital cover. If you earn above $90,000 for singles or $180,000 combined for couples, you may be faced with a surcharge on your taxes for any portion of a financial year in which you did not hold private health insurance.

We’ve collated some of the important events that may affect your budget come 1 July.

What to be aware of with health insurance at the start of a new financial year

close up of a hospital patient’s hand

With the effects of the Covid-19 pandemic seeing public waiting times increase even further as non-urgent elective procedures were put on hold[1] – it is a sensible idea to consider whether you should take out Private health insurance. Hospital cover can help to contribute toward to the cost of a range of medical expenses for hospital procedures and Extras cover contributes towards out-of-hospital care, such as dental and physiotherapy. Once you have served your waiting periods, your private coverage offers you access to care and choice of doctor when you need it most.

To encourage Australians to take out private health insurance, the Australian Government has three incentives in place that are affected by the start of a new financial year.

  1. The private health insurance Australian Government Rebate

The private health insurance rebate is available to Australian resident earning below $140,000 a year as a single adult or below  $280,000 (combined) for families with private health insurance. The value of the rebate applied to your policy will vary depending on your income. If eligible, you can choose to claim the rebate as a reduction on your premiums or as a tax refund on your tax return.

The rebate is based on age, income and family status. If any of these factors change by 30 June, your rebate for the 2019 to 2020 financial year may change.

 As an example, a single 30-year-old adult earning $80,000 a year would have a 25.059% rebate on their health insurance. On a $1,800 a year health insurance policy, this equates to a rebate of $451.

  1. You may need to pay the Medicare Levy Surcharge (MLS)

 If you earnt more than $90,000 as a single adult or $180,000 (combined) for families, and didn’t have a private hospital policy for the whole financial year, you may have to pay the Medicare Levy Surcharge (MLS) on top of your regular income tax.

Medicare Levy Surcharge – Income Thresholds
SinglesUnder $90,000$90,001-$105,000$105,001-$140,000$140,001+
Families^Under $180,000$180,001-$210,000$210,001-$280,000$280,001+
Surcharge0%1%1.25%1.5%
Retrieved from Privatehealth.gov.au | Information correct as of December 2019.
^ For families with children, thresholds increase by $1,500 for each child born after the first
Families include couples, de facto couples, and single parents.

To avoid paying MLS, take out private hospital health insurance and maintain cover for the entirety of the next financial year, not only will you avoid the tax but you will, after serving your standard waiting periods, gain access to the private coverage system, with choice of doctor and access to care when you need it most.

  1. Your Lifetime Health Cover (LHC) loading may increase

If you’re over 31, you have until the 30 June to take out hospital cover to avoid the Lifetime Health Cover (LHC) loading.

The LHC loading adds two per cent on top of your hospital cover premiums for every year you are over 30 that you don’t hold a private hospital cover policy and continues to accrue up to a maximum of 70% – it stops increasing once you take out a policy – so the sooner the better!

For example, if you decide to take out private hospital cover for the first time when you’re 41 years old, you would have to pay a 22% loading on top of your premium, this applies for 10 continuous years of cover before it’s removed. This is an additional $440 annually on a $2,000 per year policy, which amounts to $4,400 over 10 years (not taking into account if the premium changes during this time).

How your energy plan may change from 1 July 2020

woman with pet cat and coffee mug sitting in front of heater

When it comes to electricity bills, the new financial year could bring about some changes that may impact how much you’re spending on your usage.

  1. Changes to the Default Market Offer (DMO) could impact your hip pocket

 The Australian Energy Regulator (AER) governs electricity and gas markets in Australia’s south-east. A part of this regulation is the Default Market Offer (DMO), which came into effect in 2019 and affects:

  • South Australia
  • New South Wales
  • South-east Queensland.

On 1 July 2020, the DMO is changing. As such, DMO energy customers could face cheaper or more expensive energy bills based on their location. The Australian Government estimates 720,000 households and small businesses will receive lower energy bills from 1 July 2020, thanks to the DMO.[2]

New Default Market Offer annual price caps for the 2020-2021 financial year
Distribution zoneResidential customer on a flat-rate Difference to the 2019-2020 DMO (per annum)Residential customer with controlled load tariffsDifference to the 2019-2020 DMO (per annum)
Ausgrid (Greater Sydney area)$1,462 (3,900kWh p.a.)$5 lower$2,024 (general usage 4,800kWh p.a. + controlled load 2,000kWh p.a.)$35 lower
Endeavour (Sydney’s Greater West, Blue Mountains, Southern Highlands and New South Wales South Coast)$1,711 (4,900kWh p.a.)$9 lower$2,1654 (general usage 5,200kWh p.a. + controlled load 2,200kWh p.a.)$1 lower
Essential Energy (regional New South Wales)$1,960 (4,600kWh p.a.)$3 higher$2,356 (general usage 4,600kWh p.a. + controlled load 1,900kwH p.a.)$19 lower
Energex (south-east Queensland)$1,508 (4,600kWh p.a.)$62 lower$1,812 (general usage 4,400kWh p.a. + controlled load 1,900kWh p.a.)$115 lower
South Australian Power Networks (South Australia)$1,832 (4,000kWh p.a.)$109 lower$2,244 (general usage 4,200kWh p.a. + controlled load 1,800kWh p.a.)$176 lower
Source: Final Determination: Default Market Offer Prices 2020-2021. Australian Energy Regulator, Australian Government. 2020.

Notes: GST-inclusive, nominal. DMO figures correct at 30 April 2020, based on the average annual usage across distribution zones. Individual prices for customers will differ depending on their energy usage, their energy retailer and their location.

While Victorians don’t have access to the DMO, they do have the Victorian Default Offer (VDO), which changed on 1 January 2020.

Remember: you could potentially save more by comparing energy plans and getting a better offer.

  1. You may avoid large penalties if you miss pay-on-time deadlines

The Australian Energy Market Commission (AEMC) will implement a rule on 1 July that protects consumers from large penalties when they miss pay-on-time conditions.

The new rule will cap the level of conditional discounts and fees to reasonable costs. However, this only applies to new contracts signed from 1 July 2020.[3]

Conditional discounts apply if you meet certain conditions, such as always paying your energy bill on time. Conditional discounts are a separate discount to any market offer which is cheaper than the reference price set by the DMO. For example, your energy plan may be advertised as being 11% cheaper than the reference price, with an additional two per cent discount if you pay on time. Your energy retailer may apply the conditional discount to your total bill, the bill payable amount, or as a discount to your rates.

Updates to superannuation coming this new financial year

The 20/21 financial year will bring with it some changes to superannuation. These shake-ups provide options for accessing super early and saving you money when you’re consolidating multiple super funds together.

  1. Access to your superannuation

The beginning of the 2020 calendar year has been tough for many Australians, and COVID-19 has had a big impact on our budgets.

To help out, The Australian Government made changes to allow eligible Australian and New Zealand citizens and permanent residents access up to $10,000 of their super before 1 July.

What’s more, those eligible can also access a further instalment of $10,000 between 1 July to 24 September 2020.[4]

You may be eligible if:

  • you’re unemployed
  • you’re receiving a government payment
  • you have been made redundant
  • your employer reduces your income after 1 January 2020.

Learn more about eligibility criteria.

  1. You won’t need to pay tax when merging your superannuation funds

From 1 July, your superannuation funds won’t be subject to tax when you consolidate multiple funds. Self-managed super funds are excluded from this change.[5]

Bonus: Three other changes that could impact your budget

a couple sitting on the couch organising their finances

  1. From 1 July 2020, the big four banks are now required to share product reference data.[6] This change was put forward by the Australian Competition and Consumer Commission (ACCC); known as the Consumer Data Right or ‘open banking’. It’s predicted that Open Banking will assist customers with comparing financial offerings and switching banks or products. From 1 July, the big four banks must, when directed to by a consumer, share the consumer’s account and transaction data for credit and debit cards, deposit accounts and transaction accounts with other accredited data recipients. Come 1 November, additional data for mortgages and personal loans will be made available to share with accredited data recipients.

All remaining banks, building societies and credit unions will follow suit in 2021.  Consumers can see what data their bank has for them, their spending habits and financial products, and consumers can choose what parts of this data they share with other accredited third parties, such as other banks.

  1. At the start of 2020, the Australian Government began the First Home Loan Deposit Scheme (FHLDS). This scheme supports eligible first-home buyers so they can purchase their first home sooner. In January 2020 10,000 spots on the FHLDS were available, and another 10,000 places on the scheme will be opened up from 1 July 2020.[7]
  2. The Australian Government has also announced the Homebuilder Program, which includes a grant of up to $25,000 for Australians building a new home or carrying out extensive renovations.[8] This program started on 4 June 2020. You may be eligible if you earn under $125,000 as a single adult or $200,000 collectively as a couple, and if you spend up to $750,000 building a new home or spend $150,000 to $750,000 on renovations on a property that is worth less than $1.5 million before you start your reno.

This grant exists on top of state-based First Home Owners grants.

While the year is half over, our spokesperson Abigail says there is still time to act.

‘Making changes now, whether it’s switching your energy plan from a DMO to a cheaper discounted offer or making the most of a 0% balance transfer period on a credit card with a lower interest rate, will set your household budget in a better position for the future.

‘Use tax time as a reminder to do what you can to make general household savings, while also planning ahead to ensure that you’re maximising your 2020 tax return,’ Abigail said.

Sources:

[1] Australian Health Protection Principal Committee (AHPPC) statement on restoration of elective surgery. Department of Health, Australian Government. 2020.

[2] Lower energy bills for Australian households and small businesses. The Hon Angus Taylor, MP, Minister for Energy and Emissions Reduction, Department of Industry, Science, Energy and Resources, Australian Government. 2020.

[3] Regulating conditional discounting. Australian Energy Market Commission. 2020.

[4] COVID-19 early release of super. Australian Taxation Office, Australian Government. 2020.

[5] Latest news on tax law and policy. Australian Taxation Office, Australian Government. 2020.

[6] Consumer Data Right Rules made by ACCC. Australian Competition and Consumer Commission, Australian Government. 2020.

[7] First Home Loan Deposit Scheme (FHLDS). National Housing Finance and Investment Corporation, Australian Government. 2020.

[8] ‘Homebuilder’ Program to drive economic activity across the residential construction sector. The Hon. Scott Morrison, MP, Prime Minister of Australia, Australian Government. 2020.

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Written by James McCay

James is a devoted husband, father, animal lover and history buff (particularly medieval history). He studied Creative and Professional Writing at QUT, and is often buried in a book. James also enjoys historical re-enactment, spending time with his dogs, and making furniture out of reclaimed wood. He hopes to make a positive difference for readers through his writing.

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