Budget Overview
This week the Treasurer tonight handed down his first Budget and a first Budget since the change of Government in the last election. There was much speculation and conjecture regarding this Budget with a clear warning that all Australians will need to contribute to the pain of fixing the Budget. To that end the Government also held firm on its commitment not to make adverse changes to superannuation but there are some welcome amendments that will benefit financial planning clients.
Overall, the Budget deficit will fall from its current $49.9 billion to $29.8 billion next year. It will then fall to a deficit of $2.8 billion in 2017-18.
A centrepiece of the Budget is a $11.6 billion infrastructure growth package but for many financial planning clients the changes to social security and the temporary budget levy will provide the most impact.
The following summary provides the major changes announced. For further information on the 2014 Federal Budget measures, please visit www.budget.gov.au
Personal Income Tax
With the exception of the Budget repair levy, the personal income tax rates and thresholds remain unchanged from 1 July 2014.
The Government is going to introduce a new initiative by providing a tax receipt for all individuals on where and how their taxes were used.
Temporary Budget Repair Levy
The Government will introduce a three year temporary levy on high income individuals from 1 July 2014 until 30 June 2017. This will impact those respective individuals in the next 3 financial years. The levy will apply at a rate of 2% on individuals’ taxable income in excess of $180,000 per annum.
Who is impacted?
- Individuals with taxable income of $180,000 or below will pay NO levy
- Individuals with taxable income greater that $180,000 will pay a 2% levy for every dollar exceeding $180,000.
Example of how the levy will work:
- someone with taxable income of $200,000 will pay the 2% levy on $20,000 or $400
- Someone with taxable income of $300,000 will pay 2% of $120,000 or $2,400.
|
Taxable Income |
Levy 2014-15 |
Levy 2015-16 |
Levy 2016-17 |
Levy 2017-18 |
|
$180,000 or less |
$0 |
$0 |
$0 |
$0 |
|
$200,000 |
$400 |
$400 |
$400 |
$0 |
|
$250,000 |
$1,400 |
$1,400 |
$1,400 |
$0 |
|
$300,000 |
$2,400 |
$2,400 |
$2,400 |
$0 |
|
$500,000 |
$6,400 |
$6,400 |
$6,400 |
$0 |
Dependent Spouse Tax Offset
The Government will abolish the Dependent Spouse Tax Offset for all taxpayers from 1 July 2014.
Mature Age Worker Tax Offset and Restart
The Government will abolish the Mature Age Tax Offsett from 1 July 2014. Previously this measure was limited to those tax payers born before 1 July 1957.
The savings from this measure will be re-directed to the Government’s expanded seniors employment incentive payment called Restart to support mature age job seekers to re-enter the workforce.
From 1 July 2014, a payment of up to $10,000 will be available to employers who hire a mature aged job seeker, aged 50 years or over who has been receiving income support for at least six months.
Medicare Levy low-income threshold for families
The government will increase the Medicare Levy low-income threshold for families from $33,693 (2012-13) to $34,367 for the 2013-14 financial year with effect from 1 July 2013. The additional amount of the threshold for each dependant child or student will also increase from $3,094 (2012-13) to $3,156 for the 2013-14 financial year.
Medicare Levy
In last years budget there was the introduction of Disability Care and the increase in the Medicare Levy by half a percentage to help fund it.
The Medical Levy will increase from 1.5% to 2.0% from 1 July 2014.
Low-income earners will continue to receive relief from the Medicare Levy through the low-income thresholds for singles, families, seniors and pensioners. The current exemptions from Medicare will also remain and apply to Disability Care.
Medicare Levy Surcharge & GP visits
From 1 July 2015 to 30 June 2018 the Medicare Levy Surcharge and Private Health Insurance Rebate thresholds will not be indexed.
From 1 July 2015 there will be a $7 charge for each currently bulk-billed service. This will be capped at 10 services per calendar year for concessional patients and children under 16.
Superannuation
Super Guarantee Increase to 12%
The Government is changing the original proposal in how the superannuation guarantee will be increased to 12%.
Originally the Government was going to pause the increase that was due to occur from 1 July 2014. They have now decided that the increase to 9.5% will proceed from 1 July 2014 and will pause at 9.5% until 30 June 2018.
The Super Guarantee will then increase by 0.5% each year until it reaches 12% in 2022-23. One year later than previously proposed.
|
Financial Year |
SG Rate |
|
2014-15 |
9.5% |
|
2015-16 |
9.5% |
|
2016-17 |
9.5% |
|
2017-18 |
9.5% |
|
2018-19 |
10% |
|
2019-20 |
10.5% |
|
2020-21 |
11% |
|
2021-22 |
11.5% |
|
2022-23 |
12% |
Non-Concessional Excess Contribution Tax
For any excess contributions made after 1 July 2013, breaching the non-concessional cap, the Government will allow individuals to withdraw those excess contributions and associated earnings.
If any individual chooses this option, no excess contributions tax will be payable and any related earnings will be taxed at the individual’s marginal tax rate.
Individuals who leave their excess contributions in the fund will continue to be taxed on these contributions at the top marginal rate.
Taxation and Small Business
The Government will provide $8 million over four years to establish the Small business and Family Enterprise Ombudsman. The policy intention is to allow small business to get the same protections as consumers when it comes to unfair contracts imposed by big business.
Company tax rates
The government will cut the company tax rate by 1.5% from 1 July 2015. For large companies the reduction will offset the paid parental leave scheme.
Social Security and Family Payments
Trial Measure – Supporting Seniors who downsize their home
The Government has decided to not proceed with the Supporting Senior Australians — Housing Help for Seniors — pilot measure, announced in the 2013-14 Budget, and due to commence on 1 July 2014.
The previous government was going to run a trail to support Age Pensions who want to downsize their home, without it immediately affecting their Age Pension.
Under the current rules, the value of the family home is not assessed and does not affect a person’s pension. This means that many seniors may not sell the home as a result of it impacting on their Age Pension.
Increase the Age Pension qualifying age to 70 years
From 1 July 2025, the Age Pension qualifying age will continue to rise by six months every two years, from the qualifying age of 67 years that will apply by that time, to gradually reach a qualifying age of 70 years by 1 July 2035.
|
Date of Birth |
Retirement Age |
| 1 July 1952 and 31 December 1953 |
65 1/2 |
| 1 January 1954 and 30 June 1955 |
66 |
| 1 July 1955 and 31 December 1956 |
66 1/2 |
| 1 January 1957 and 30 June 1958 |
67 |
| 1 July 1958 and 31 December 1959 |
67 1/2 |
| 1 January 1960 and 30 June 1961 |
68 |
| 1 July 1961 and 31 December 1962 |
68 1/2 |
| 1 January 1963 and 30 June 1964 |
69 |
| 1 July 1964 and 31 December 1965 |
69 1/2 |
| 1 January 1966 and later |
70 |
Index Pension and Pension Equivalent Payments by the Consumer Price Index
The Government will commence indexing pension and equivalent payments and Parenting Payment Single by the Consumer Price Index (CPI).
This measure will commence on 1 July 2014 for Parenting Payment Single recipients and from 1 September 2017 for Bereavement Allowance and pension payments such as:
- Age Pension;
- Disability Support Pension;
- Carer Payment and
- Veterans’ Affairs pensions.
Currently, these payments are indexed in line with the higher of the increases in the CPI, Male Total Average Weekly Earnings or the Pensioner and Beneficiary Living Cost Index.
Assets Test Deeming Rate Thresholds
From 20 September 2017, the Government will reset the deeming thresholds used in the pension assets test:
- For singles, from $46,000 to $30,000; and
- For couples, from $77,400 to $50,000.
One-Week Ordinary Waiting Period
The Government will commence applying the One-Week Ordinary Waiting Period (OWP) to all Working Age Payments from 1 October 2014.
All claimants of Newstart Allowance and Sickness Allowance are required to wait one-week before receiving payment, unless the claimant is exempt or the waiting period is waived. This measure will extend the OWP to claimants of Parenting Payment, Widow Allowance and Youth Allowance (other).
This measure will also remove the current rule that enables the OWP to be served concurrently with other applicable waiting periods.
Commonwealth Seniors Health Card
Annual indexation of income thresholds
The Government will index current income limits for the Commonwealth Seniors Health Card by the Consumer Price Index from September 2014.
This will allow more retirees access to medicines listed on the Pharmaceuticals Benefits Scheme at a concessional rate.
Include untaxed superannuation income in the eligibility assessment
From 1 January 2015 the Government will commence including untaxed superannuation income in the assessment of income to determine eligibility for the Commonwealth Seniors Health Card (CSHC).
The assessment of superannuation income will be the same for CSHC holders as for Age Pension recipients and will align with the 2013-14 Budget measure to deem the balances of account-based superannuation of pensioners from 1 January 2015.
All superannuation account-based income streams held by CSHC holders before the implementation date will be grandfathered under the existing rules.
Cessation of the Seniors Supplement
From 20 September 2014 the Government will cease the Seniors Supplement for holders of the Commonwealth Seniors Health Card (CSHC).
Eligible seniors who do not receive a pension will continue to be eligible for a concession card. CSHC holders will still receive the Clean Energy Supplement and a range of concessional benefits including lower co-payments for medicines on the Pharmaceutical Benefits Scheme and access to the lower threshold for the extended Medicare Safety Net.
Paid Parental Leave
From 1 July 2015 the Government will deliver the paid parental leave scheme which will provide six months paid leave and will include superannuation.
