Please note the following announcements made on 12 May 2015 are the Budget Highlights as we see them. Before acting on any of these announcements please speak to one of the advisers at Continuum Financial Planners, to ensure it is appropriate to your personal situation.

budget highlights 2015The following budget highlights are summarised from the 2015 Federal Budget issued by the Australian Treasurer. They are posted as an alert only: it will be important to monitor the progress of Bills through the Federal Parliament to enact the measures before acting on them. Our advisers stay up-to-date on these changes and are experienced in advising on how they might impact your situation. If you have any concerns regarding any of the following items and their impact on your wealth management strategies, please call our office (on 07-3421 3456), or use the website Contact Us form to obtain prompt and courteous attention.

The 2015 budget highlights have been categorised under the headings Taxation, Retirement, Superannuation and Families…

budget highlights taxation measures 2015 Federal Budget Highlights: its effect on Taxation

Increase in the Medicare levy low income thresholds for families
Effective Date: 1 July 2014

The Government has announced an increase in the new Medicare levy thresholds that are applicable for the current financial year (ending 30 June 2015). Unlike last year’s Budget, the increase will apply for singles as well as families.

The new threshold for singles is $20,896 (previously $20,542). For couples with no children, the new threshold will be $35,261 (previously $34,367). The threshold increases by $3,238 for each dependent child or student (the previous increase was $3,156).

For single seniors and pensioners, the threshold will increase from $32,279 to $33,044. 

Where a person or family has total income below this relevant threshold, no Medicare levy will be payable.

New method for calculating work-related car expense deductions
Effective date: 1 July 2015

Currently, there are four methods for calculating the amount of tax deduction for eligible work related car expenses. These are:

  • The 12% of original cost method
  • The 1/3rd of actual expense method
  • The cents per kilometre method, and
  • The log book method.

From 1 July, the first two methods will be abolished as less than 2% of those who claim work related car expenses used these methods. In addition, the current varying rates available (depending on engine size) under the cents per kilometre method will be changed to a single universal rate of 66 cents per kilometre. The log book method will remain unchanged.

Accelerated depreciation for small business taxpayers
Effective date: Immediately (7:30pm AEST on 12 May 2015) until 30 June 2017

Small business taxpayers (those with aggregated annual turnover not exceeding $2 million) will have the ability to claim an immediate tax deduction for assets that cost less than $20,000 if purchased and installed ready for use between Budget night and 30 June 2017. Those assets that are valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool and depreciated at 15% in the first year and 30% each income year thereafter.

Reduction in tax for small businesses
Effective date: 1 July 2015

From 1 July 2015, small business taxpayers operating via a corporate structure will have their corporate tax rate cut from the current 30% to 28.5%. This will apply to small business corporates with an annual aggregated turnover of below $2 million. If the level of turnover exceeds this amount, the standard 30% corporate tax rate will apply to all of their taxable income (not just the amount in excess). Whilst the level of corporate tax is reduced, the manner of paying franked dividends to shareholders is unchanged, with a maximum rate of franking credit able to be paid maintained at the current 30% level.

Immediate deductibility for new business for certain start up costs
Effective date: From 1 July 2015

Currently, when a new business is established, some of the costs associated with that business are eligible for deduction over a period of five years. From 1 July 2015, the laws will be amended to allow these businesses to claim an immediate deduction for a range of professional expenses associated with starting a new business. Whilst not fully detailed, the expenses allowed for immediate deduction are expected to cover certain professional, legal and accounting advice.

Capital gains tax roll-over relief for changes to entity structure
Effective date: From 1 July 2016 

The Government will allow small businesses with an aggregated annual turnover of less than $2 million to change legal structure without attracting a capital gains tax (CGT) liability at
that point.

CGT roll-over relief is currently available for individuals who incorporate but all other entity type changes have the potential to trigger a CGT liability. This measure recognises that new
small businesses might choose an initial legal structure that they later find does not suit them when the business is more established.

Small business FBT exemption for work related electronic devices
Effective date: from 1 April 2016

Currently, an exemption from fringe benefits tax is available where an employee packages (or an employer provides) a portable electronic device (eg mobile phone, iPad, laptop etc). This exemption is currently available where an employee packages (or is provided) multiple devices provided that the devices perform substantially different functions.

From 1 April 2016, where this device is provided (or packaged) with a small business employer (ie aggregated annual turnover below $2M), this exemption will be available across all such devices that are primarily used for work purposes. This change recognises that with the evolution of technology, there is an increasing level of similarly in functions that can be undertaken by items such as smart phones, tablets and some laptops.

Accelerated depreciation for primary producers
Effective date: From 1 July 2016

All primary producers (eg farmers) will be able to claim an immediate deduction for the capital cost of fencing and water facilities, and claim depreciation over a shorter period of three years for capital expenditure on fodder storage assets (such as silos and tanks used to store grain and other animal feed).

HELP – Recovery of repayments from overseas debtors
Effective date: 1 July 2016

From the 2016-17 financial year, HELP debtors residing overseas for six months or more will be required to make HELP repayments if their worldwide income exceeds the minimum repayment threshold.

GST for imported digital products and services
Effective date: From 1 July 2017

From 1 July 2017, offshore supplies of digital services and intangibles to Australian consumers will be subject to GST.

budget highlights retirement measures 2015 Federal Budget Highlights: its effect on Retirement

Alignment of aged care means testing arrangements

Effective date: 1 January 2016

The Government proposes to include rental income from the home for both Social Security and Aged Care means tests where a person resides in aged care and pays periodic accommodation payments. The new rules will apply only to new entrants. Currently income from renting the home is exempt from both the Social Security and Aged Care means test. There is no change to the treatment of the home under the asset tests. The home remains a Social Security exempt asset for two years after the last member of a couple leaves, whilst under the aged care means test only a part of the value of the home is assessed.

Reduction in eligibility period for certain pension recipients whilst overseas
Effective date: 1 January 2017

From 1 January 2017, certain recipients of the Age Pension, Wife Pension, Widow B Pension and the Disability Support Pensions that are absent from Australia will have their eligible period for full payment reduced from 26 weeks to 6 weeks.

After the six week period, those who have lived in Australia for less than 35 years will be paid at a reduced rate. Those who have lived in Australia for more than 35 years (since the age of 16 until Age Pension age), or are otherwise exempt, will not have their payments reduced.

Those overseas at the time of commencement will not be affected unless they return to Australia and commence another overseas trip.

Changes to assets test thresholds and taper rates
Effective date: 1 January 2017

As announced prior to the Budget, the Government is proposing significant changes to the assets test for determining pension eligibility from 1 January 2017.

The proposed change will restore the existing taper rate of $1.50 pension reduction for every $1,000 above the relevant threshold, to the pre 2007 level of $3.00 for every $1,000 of assets above the threshold.

The measure, if passed will take effect from 1 January 2017 in place of the 2014 Budget measure currently in the Senate to index pensions from 1 January 2017 solely to CPI increases. As such pensions will continue to be indexed by the greater of CPI and the Pensioner and Beneficiary Living Cost Index plus benchmarked to a percentage of Male Total Average Weekly Earnings.

Importantly all people affected by the scaling back of the maximum asset threshold will be guaranteed eligibility for the Commonwealth Seniors Health Card (CSHC) or Health Care Card, which provides the same concessional access to pharmaceuticals as given to those on the pension.

The table below outlines the current and proposed thresholds

Projected
Thresholds
1 July 2017
Current Proposed
Asset threshold Cuts off Asset threshold Cuts off
(estimated)
Single
homeowners
$202,000 $755,000 $250,000 $547,000
Couple
homeowners
$286,500 $1,151,500 $375,000 $830,000
Single
non-homeowners
$348,500 $922,000 $450,000 $747,000
Couple
non-homeowners
$433,000 $1,298,000 $575,000 $1,023,000

Improving integrity of social security income test arrangements
Effective date: 1 January 2016

The deductible amount of an income stream payment is not counted as income under social security income tests. Defined benefit income streams are calculated on an employee’s length of service and final salary. Currently under social security income tests the tax free component of a defined benefit income stream is counted as the deductible amount. The Government proposes that the deductible amount of a superannuation defined benefit pension be capped at a maximum of 10 per cent of income.

Those receiving DVA pensions and military superannuation fund defined benefit pensions are exempt from this measure.

Those receiving defined benefit pensions may have reduced social security entitlements due to increased assessable income attributed to defined benefit income stream. The measure may also impact aged care residents as the defined benefit income is also assessed as income for aged care fees.

budget highlights superannuation measures 2015 Federal Budget Highlights: its effect on Super

Welcome news to members of superannuation funds was the announcement by the Federal Treasurer, Joe Hockey, that there were to be no changes to the taxation on superannuation funds during this government’s period of office.

Release of Superannuation for those suffering a terminal illness
Effective date: 1 July 2015

Currently, where a person has been diagnosed with a terminal illness and has two medical practitioners (including one specialist) certify that they are likely to pass away within 12 months, they are able to immediately access their superannuation savings tax free irrespective of their age. However, where a person has a terminal illness but is expected to live longer than 12 months, they need to wait before being eligible to access their super under this method. 

As announced in the lead up to the Budget, the Government will legislate to increase the eligibility timeframe from 12 months to 24 months.

Lost and unclaimed superannuation
Effective Date: 1 July 2016

Statistics released by the Australian Taxation Office (ATO) in August 2014 revealed that more than $14 billion in lost super is waiting to be claimed. To make it easier for individuals to find their lost super, the Government intends to remove redundant reporting obligations and streamline lost and unclaimed superannuation administrative arrangements.

budget highlights Families measures2015 Federal Budget Highlights: its effect on Families

Introduction of a single Child Care Subsidy
Effective date: From 1 July 2017

The Government will replace the Child Care Benefit, Child Care Rebate and the Jobs, Education and Training Child Care Fee Assistance programs with a new, single, means-tested Child Care Subsidy (CCS).

Families meeting the activity test with annual incomes up to $60,000 will be eligible for a subsidy of 85% of the actual fee paid up to an hourly fee cap. The subsidy will taper to 50% for eligible families with annual incomes of $165,000.

The hourly fee cap in 2017-18 will be set at $11.55 for long day care, $10.70 for family day care, $10.10 for outside school hours care and $7.00 for a nanny in a child’s home (pilot program from 1 January 2016). The hourly caps will be indexed by CPI.

Eligibility will be linked to a new activity test to better align receipt of the subsidy with hours of work, study, or other recognised activities.

The CCS will have no annual cap for families with annual incomes below $180,000. For families with annual incomes of $180,000 and above the CCS will be capped at $10,000 per child per year.

The income threshold for the maximum subsidy will be indexed by CPI with other income thresholds aligned accordingly.

Removing double-dipping from Paid Parental Leave
Effective date: From 1 July 2016

The Government will remove the ability for individuals to take Parental Leave Pay (PLP) from the Government in addition to any employer-provided parental leave entitlements. Currently individuals can double dip, by taking payments from both the Government and their employer.

The Government will ensure that all primary carers would have access to parental leave payments that are at least equal to the maximum PLP benefit (currently 18 weeks at the national minimum wage).

Cessation of the Large Family Supplement
Effective date: From 1 July 2016

The Government will cease payment of the additional Family Tax Benefit (FTB) Part A Large Family Supplement.

FTB Part A – reduced portability
Effective date: From 1 January 2016

The Government will reduce the amount of time FTB Part A will be paid to recipients who are outside Australia. Currently, FTB Part A recipients who are overseas are able to receive their usual rate of payment for six weeks and then the base rate for a further 50 weeks.

Families will only be able to receive FTB Part A for six weeks in a 12 month period while they are overseas.