2014 Australian Federal Budget Update

2014 Federal BudgetLast night Federal Treasurer Joe Hockey announced a Federal Budget for 2014/15  that asks all Australians to bear the burden, as the Government attempts to bring the Budget back into surplus and to reduce the national debt.

As expected, the budget includes a number of spending cuts and only two major spending initiatives – the introduction of an $11.6 billion infrastructure growth package and the creation of a $20 billion medical research future fund by 2020.

Click on the links below for more details on each of the announcements.

Do you need to modify your personal budget in response?

The experienced advisers at Continuum Financial Planners Pty Ltd are available to listen to your concerns and to work with you to develop a strategy to accommodate any changed financial circumstances you are in as a consequence of the Federal Budget as the various measures come into law (which is yet to happen of course). For a personalised, professional approach to your wealth management requirements, make an appointment with one of our team: to do so, call our office on 07-34213456; or use our Contact Us facility and be assured of prompt attention.

The ContinuumFP Team

Tax: Fuel excise indexation reintroduced2018-01-04T17:15:55+10:00

The Government announced the biannual fuel excise indexation reintroduced from early in the 2015 financial year. It will increase by the Consumer Price Index of excise and excise-equivalent customs duty for all fuels except aviation fuels from 1 August 2014. This will secure funding for additional productivity enhancing road infrastructure projects to build new and upgrade existing road infrastructure and includes allowances to increase Ethanol Production Grants and the Cleaner Fuel Grants Scheme.

The Government will amend the ‘Excise Act 1901’ to ensure that the amount spent on road infrastructure funding is greater than the net revenue from the reintroduction of indexation on fuel excise and excise-equivalent customs duty.

Tax: Temporary Budget Repair Levy (TBRL)2018-01-03T21:45:26+10:00

As speculated in the lead up to the Budget announcements, the Government has introduced a temporary 2% TBRL applying to high income earners. For a period of three years from 1 July 2014, the highest marginal tax rate of 45% will be increased to 47%.

The Government has also confirmed that a number of other tax rates that are currently based on calculations referencing the highest marginal tax rate will also be increased over the same period, such as the fringe benefits tax (FBT) rate.

The TBRL will only apply to you if you have taxable income exceeding $180,000 and is only payable on the amount in excess of $180,000.

For example, if you had taxable income of $230,000, the additional 2% TBRL only applies to $50,000 (the amount above $180,000) resulting in an increase in tax payable (ignoring Medicare levy) of $1,000.

Tax: Abolishing the Dependent Spouse Tax Offset2018-01-03T21:45:53+10:00

The 2012-13 Mid-year Economic and Fiscal Outlook measure ‘Personal income tax – Dependant Spouse Tax Offset phase out’ limited access to the Dependant Spouse Tax Offset to those whose dependant spouse was born before 1 July 1952, effective from 1 July 2012. The Government will completely abolish the Dependent Spouse Tax Offset for all taxpayers from 1 July 2014.

Tax: Medicare levy low income thresholds for families2018-01-03T21:46:27+10:00

The Government has announced an increase in the new Medicare levy thresholds that are applicable for the current financial year (ending 30 June 2014), but for families only. The new threshold is $34,367 (previously $33,693). The threshold increases by $3,156 for each dependent child or student (the previous increase was $3,094).

Thresholds for individuals and pensioners will remain at their 2012/13 levels, being $20,542 and $32,279 respectively.

Tax: Medicare Levy Surcharge and Private Health Insurance Rebate2018-01-03T21:46:54+10:00

The Government has announced that it intends to freeze the indexation of the thresholds used to determine your ability to claim a Private Health Insurance Rebate or be liable for the Medicare Levy Surcharge effective from 1 July 2015. The same threshold (based on an adjusted taxable income calculation) is used for determining both. This freeze will last for two years, with indexation due to recommence from 1 July 2017.

Soc Sec: Increasing the Age Pension qualifying age to 702018-01-03T21:47:36+10:00

Under current legislation the Age Pension qualifying age increases by 6 months every 2 years commencing 1 July 2017 until it reaches age 67 on 1 July 2023. The Government proposes to continue this rate of increase as per the following table until the qualifying age reaches age 70 on 1 July 2035.

Proposed Increase to Age Pension Age
Date Date of birth Age Pension Age
01/07/2017 01/07/1952 to 31/12/1953 65 years and 6 months
01/07/2019 01/01/1954 to 30/06/1955 66 years
01/07/2021 01/07/1955 to 31/12/1956 66 years and 6 months
01/07/2023 01/01/1957 to 30/06/1958 67 years
01/07/2025 01/07/1958 to 31/12/1959 67 years and 6 months
01/07/2027 01/01/1960 to 30/06/1961 68 years
01/07/2029 01/07/1961 to 31/12/1962 68 years and 6 months
01/07/2031 01/01/1963 to 30/06/1964 69 years
01/07/2033 01/07/1964 to 31/12/1965 69 years and 6 months
01/07/2035 On or after 01/01/1966 70 years

If you were born before 1 July 1958, you will not be affected by this announcement.

Soc Sec: Indexing Pension and other payments by CPI2018-01-03T21:48:07+10:00

Effective from 1 July 2014 for Parenting Payment Single recipients and 1 September 2017 for Bereavement Allowance and pension payments such as Age Pension, Disability Support Pension; Carer Payment and Veteran’s Affairs Pension

Currently these payments are indexed in line with the higher of the increases in the CPI, Male Total Average Weekly Earnings or the Pensioners and Beneficiary Living Cost Index. The CPI is normally lower than the other two measures which will result in a reduction in the rate of increase of these pensions over time.

Soc Sec: Resetting the Assets test Deeming Rate Thresholds2018-01-03T21:48:40+10:00

Effective from 20 September 2017, The Government proposes to reset the deeming thresholds used for measurement of income from financial products when assessing eligibility for welfare payments to $30,000 for singles and $50,000 for couples. Currently for singles financial assets up to $46,600 are deemed at 2% and above this level at 3.5% whilst for a couple the threshold is $77,400.

Soc Sec: Commonwealth Seniors Health Card2018-01-03T21:49:08+10:00

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). Superannuation income will be assessed in the same way 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.

Soc Sec: Family Tax Benefit changes2018-01-03T21:50:18+10:00

The Government is tightening eligibility for family payments by making a number of changes to Family Tax Benefit A (FTB-A) and Family Tax Benefit B (FTB-B).

From 1 July 2014:

  • The payment rates of FTB-A and FTB-B, excluding supplements will stay at current levels until 30 June 2016.
  • FTB income thresholds will stay at current levels for three years. The income threshold for the maximum rate of FTB-A will remain at $48,837 per annum and the lower income earner threshold for FTB-B will remain at $5,183 per annum until 30 June 2017.

     

From 1 July 2015:

  • The FTB-B primary earner income limit will be reduced from $150,000 to $100,000 per annum. The income threshold for the Dependent (Invalid and Carer) Tax Offset will also be reduced to $100,000.
  • FBT-B payments will be paid until the youngest child turns six. A transitional arrangement will ensure families with a youngest child aged six and over on 30 June 2015 will remain eligible for FTB-B for two years.
  • A new allowance of $750 per child for single parents on the maximum rate of FTB-A whose youngest child is aged between six and 12 years old from the point when they become ineligible for FTB-B will be introduced.
  • year supplements return to their original amounts of $600 per annum per FTB-A child and $300 per family per annum for each FTB-B family.
  • A Large Family Supplement (currently $313.90 per child per annum) will be limited to families with four or more children.
  • Removal of the FTB-A per child add-on to the higher income free threshold for each additional child.
  • FTB-A high income-free area will be $94,316 per annum for all families.
Soc Sec: Disability Support Pension proposals2018-01-03T21:50:45+10:00

The Government has proposed over the next 5 years to review Disability Support Pension (DSP) recipients under the age of 35 and granted the benefit between 1 January 2008 and 31 December 2011. These recipients will be assessed against the current rules.

Recipients who are deemed to be eligible to continue to receive DSP will be obligated to “complete a programme of activities to build their work capacity” unless they are deemed to be severely disabled, defined as having a capacity to work of less than 8 hours a week. Where the claimant does not complete the programme of activities, they will be subject to sanctions.

Soc Sec: Newstart Allowance and Sickness Allowance2018-01-03T21:51:21+10:00

Effective from 1 January 2015, the Government has proposed increasing the eligibility age for Newstart Allowance and Sickness Allowance from age 22 to age 24 for new claimants from 1 January 2015.

In addition, from 1 January 2015 all new claimants of Newstart Allowance (and Youth Allowance (Other)) who are under 30 years of age must undertake appropriate job search and participate in employment services support for six months before receiving payments. The six month period may be reduced where the claimant has prior workforce participation.

After six months, they will be required to undertake Work for the Dole for 25 hours per week to receive income support unless they are the principal carer of a child, are a part-time apprentice or are in education.

Other: Patient contributions for Doctors, pathology and diagnostic imaging services2018-01-03T21:52:20+10:00

Effective from 1 July 2015, The Government proposes to reduce Medicare Benefits Schedule (MBS) rebates by $5 for standard general practitioner consultations and out-of- hospital pathology and diagnostic imaging services and allowing the providers of these services to collect a patient contribution payment of $7 per service. For concession card holders and children under 16 the MBS rebate will only be reduced for the first 10 services per year.

A new Low Gap Incentive will replace bulk billing incentives for providers of these services. The Low Gap Incentive will be paid to providers where they provide services to patients with concession cards or children under 16 years of age and only charge the $7 patient contribution – for the first 10 services in a year, or where they charge no patient contribution – for additional services in that year.

The measure will also remove the restriction on State and Territory Governments from charging patients presenting to hospital emergency departments for general practitioner like attendances

Other: Increasing co-payments and safety net thresholds under the PBS2018-01-03T21:52:48+10:00

Effective from 1 January 2015, The Government proposes to increase Pharmaceutical Benefit Scheme (PBS) co–payments for general patients by $5.00 (from $37.70 to $42.70) and for concessional patients by $0.80 (from $6.10 to $6.90) in 2015.

PBS safety net thresholds will increase each year for four years from 1 January 2015, with general safety net thresholds to increase by 10 per cent each year and concessional safety nets to increase by the cost of two prescriptions each year.

These are user pay measure which will force people to start saving or budgeting for future medical contingencies.

Other: Stronger participation incentives for job seekers under 302018-01-03T21:53:17+10:00

From 1 January 2015, all new claimants of Newstart Allowance and Youth Allowance (Other) who are under 30 years of age must demonstrate appropriate job search and participation in employment services support for six months before receiving payments. The waiting period may be reduced based on previous workforce participation.

After six months, claimants will be required to participate in 25 hours per week Work for the Dole to receive income support, and following this may continue to access employment services for a further six month period, including access to a wage subsidy in lieu of income support.

Existing recipients of Newstart Allowance and Youth Allowance (Other) who are under 30 years of age will also become subject to these new arrangements from 1 July 2015. These people will have already served six months on Work for the Dole.

Young people who do not have full capacity to work, are the principal carer of a child, are part-time apprentices, are in education or are job seekers in Disability Employment Services or Job Services Australia Streams 3 and 4 will be exempt.

Other: First Home Saver Accounts scheme2018-01-03T21:53:52+10:00

Due to lower than forecast take-up rates, the First Home Saver Accounts scheme will be abolished. New accounts opened from Budget night will not be eligible for concessions, with the Government co-contribution to cease from 1 July 2014 and tax concessions and the Income and Assets test exemptions for government benefits associated with these accounts to cease from 1 July 2015.

Tax: Repeal of the Mineral Resource Rent Tax2018-01-03T21:54:20+10:00

The Mineral Resource Rent Tax Repeal and other Measures Bill was rejected in the Senate on 25 March 2014. A number of key commitments from the previous Government were to be funded by the MRRT. The Tax repeal legislation removed a number of measures that were to be funded by the MRRT. Specially, the Bill included a proposal to repeal the low income superannuation contribution from 1 July 2013 as well as the removal of the school kids bonus.

The Government reaffirmed their position on the removal of both the Carbon Tax and the Mineral Resources and as these measures are linked, it’s assumed that both are likely to disappear when and if the Tax Repeal legislation becomes law.

Tax: Medicare Levy to rise to fund National Disability Insurance Scheme2018-01-03T21:54:48+10:00

As announced in the 2013 Budget, the Medicare Levy will increase by 0.5% to 2.0% of taxable income. This measure will commence on 1 July 2014.

Tax: Company Tax Rate reduction2018-01-03T21:55:16+10:00

The Government announced their commitment to reducing the company tax rate from its existing level of 30% to 28.5% from 1 July 2015.

Tax: Abolishing the Mature Age Worker Tax Offset2018-01-03T21:55:49+10:00

mature age worker tax offset phase limited access to the Mature Age Worker Tax Offset to taxpayers born before 1 July 1957, effective from 1 July 2012. The Government will completely abolish the Mature Age Worker Tax Offset from 1 July 2014.

The savings will be redirected to the Government’s Restart Program 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.

Payments will commence after the worker has been employed for at least six months and will be paid in the following instalments:

  • $3,000 after 6 months of employment
  • $3,000 after 12 months of employment
  • $2,000 after 18 months of employment, and
  • $2,000 after 24 months of employment.
By |2018-01-03T22:00:21+10:00May 14, 2014|Market Updates|0 Comments

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