With the release of the government’s budget we have reviewed the Thomson Reuters Tax News detailed analysis and from that summarised some key points.
PERSONAL TAXATION
FBT Rate Increase
FBT rate will increase from 47% to 49% from 1st April 2015 to 31 March 2017 to prevent high income earners from utilising fringe benefits to avoid the levy.
Personal Tax Rates
The legislated tax-free threshold of $18,201 will increase to $19,401 from 1st July 2015 to 30th June 2017. If including Medicare Levy the top marginal rate would be 49% from 1st July 2015 to 30th June 2017. There was, however, strong opposition from the Greens and labour making it highly unlikely to pass through parliament by 30th June 2014. The Low Income Tax Offset of July 1st 2015 is $300.
The legislated tax-free threshold of $18,201 will increase to $19,401 from 1st July 2015 to 30th June 2017. If including Medicare Levy the top marginal rate would be 49% from 1st July 2015 to 30th June 2017. There was, however, strong opposition from the Greens and labour making it highly unlikely to pass through parliament by 30th June 2014. The Low Income Tax Offset of July 1st 2015 is $300.
Medicare Levy
The Medicare Levy will increase from 1.5% to 2% as of 1st July 2014. As of income year 2013-14 the Medicare Levy for low-income families will increase to $34,367 and each dependent child or student will also be increased to $3156. Private health insurance income thresholds will be frozen for 3 years, form 1st July 2015.
The Medicare Levy will increase from 1.5% to 2% as of 1st July 2014. As of income year 2013-14 the Medicare Levy for low-income families will increase to $34,367 and each dependent child or student will also be increased to $3156. Private health insurance income thresholds will be frozen for 3 years, form 1st July 2015.
Family Tax Benefits Part B
FTB-B primary earner income limit will be reduced from $150,000p.a to $100,000p.a as of 1st July 2015. FTB-B will be limited to families whose youngest child is under the age of 6 at 1st July 2015. As a part of transition arrangements, families with a child 6 years or over, on 30th June 2015, will remain eligible for FTB-B for 2 years.
FTB-B primary earner income limit will be reduced from $150,000p.a to $100,000p.a as of 1st July 2015. FTB-B will be limited to families whose youngest child is under the age of 6 at 1st July 2015. As a part of transition arrangements, families with a child 6 years or over, on 30th June 2015, will remain eligible for FTB-B for 2 years.
Dependant Offsets
Nearly all dependant tax offsets, including the dependent spouse tax offset, will be abolished for all tax payers at 1st July 2014.
Nearly all dependant tax offsets, including the dependent spouse tax offset, will be abolished for all tax payers at 1st July 2014.
Mature Age Worker Offset
The Mature Aged Worker Offset will be abolished 1st July 2014 and will be replaced with an expanded senior employment incentive payment called ‘Restart’. As of July 1st 2014 a payment of up to $10,000 will be available for employers who hire mature aged job seekers, 50 and over, who have been receiving income support for at least 6 months.
The Mature Aged Worker Offset will be abolished 1st July 2014 and will be replaced with an expanded senior employment incentive payment called ‘Restart’. As of July 1st 2014 a payment of up to $10,000 will be available for employers who hire mature aged job seekers, 50 and over, who have been receiving income support for at least 6 months.
SME Instant Asset Write-Off
Due to mining tax not being repealed there is confusion as to whether the $6,500 write-off still stands, and that’s despite the Government’s intention to scale it back to $1,000 as of January 1st 2014. We are still awaiting clarification on this matter from the government but if it doesn’t come soon it may be too late to take advantage of this generous write-off.
Due to mining tax not being repealed there is confusion as to whether the $6,500 write-off still stands, and that’s despite the Government’s intention to scale it back to $1,000 as of January 1st 2014. We are still awaiting clarification on this matter from the government but if it doesn’t come soon it may be too late to take advantage of this generous write-off.
SUPERANNUATION
Option to Withdraw Excess Contributions
Excess contributions and associated earnings will be allowed to be drawn for any excess non-concessional contributions made after 1st July 2013. If individuals choose this option, no excess contributions tax will be payable and any related earnings will be taxed at the individual’s marginal tax rate. If, however, the excess non-concessional contributions are left in their superannuation fund they will continue to be taxed on these at top marginal tax rate.
Excess contributions and associated earnings will be allowed to be drawn for any excess non-concessional contributions made after 1st July 2013. If individuals choose this option, no excess contributions tax will be payable and any related earnings will be taxed at the individual’s marginal tax rate. If, however, the excess non-concessional contributions are left in their superannuation fund they will continue to be taxed on these at top marginal tax rate.
Non-concessional contributions in excess of a person’s cap are currently taxed 46.5% (47% as of 1st July 2014): s5 Superannuation (Excess Non-Concessional Contributions Tax) Act 2007. The liability for this tax is currently levied on the individual who must5 withdraw an amount form their superannuation fund equal to the tax liability by providing the release authority to their superannuation provider within 21 days.
Superannuation Guarantee Rate
Instead of pausing Superannuation Guarantee Rates the Government will be increasing it to 9.5% on 1st July 2014 and leave it at this level until 30 June 2017.
Instead of pausing Superannuation Guarantee Rates the Government will be increasing it to 9.5% on 1st July 2014 and leave it at this level until 30 June 2017.
Military Superannuation
The new arrangements will allow Australian Defence Force (ADF) members to choose which super fund they belong to and give those members the ability to transfer their accumulated benefits to a new fund if they leave the ADF. There will be no change to superannuation arrangements for Military Super Benefits Scheme’s members, but they may elect to be covered by the new arrangements.
The new arrangements will allow Australian Defence Force (ADF) members to choose which super fund they belong to and give those members the ability to transfer their accumulated benefits to a new fund if they leave the ADF. There will be no change to superannuation arrangements for Military Super Benefits Scheme’s members, but they may elect to be covered by the new arrangements.
WELFARE AND PENSION MEASURES
Age Pension to Increase to 70 by 2035
From 1st July, 20205, the Age Pension qualifying age will increase by 6 months every 2 years, from 67 years, to gradually reach a qualifying age of 70 years by July 1st 2035. There is much opposition from The Greens and Clive Palmer surrounding the increase in qualifying age making it ‘tricky’ to negotiate the measure through the senate.
From 1st July, 20205, the Age Pension qualifying age will increase by 6 months every 2 years, from 67 years, to gradually reach a qualifying age of 70 years by July 1st 2035. There is much opposition from The Greens and Clive Palmer surrounding the increase in qualifying age making it ‘tricky’ to negotiate the measure through the senate.
Participation Incentives for Job Seekers Under 30
From 1st January 2015, all new claims 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 6 months before receiving payments. Existing recipients under the age of 30 will also become subject to these new arrangements as of 1st July 2015.
From 1st January 2015, all new claims 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 6 months before receiving payments. Existing recipients under the age of 30 will also become subject to these new arrangements as of 1st July 2015.
OTHER MEASURES
Fuel Excise to Rise
Starting August 1st 2014 biannual indexation by the CPI of excise and excise equivalent customs duty for all fuels, except aviation fuels, will be re-introduced.
Starting August 1st 2014 biannual indexation by the CPI of excise and excise equivalent customs duty for all fuels, except aviation fuels, will be re-introduced.
HECS and HELP Measures
Income threshold for repayment of Higher Education Loan Programme (HELP) debts commencing 2016-17 will be reduced and will just indexation for HELP debts from 1 June 16. HELP debts will be adjusted from the Consumer Price Index to a rate equivalent to the yields on 10 year bonds issued by the Australian Government , capped at 6%, starting June 1st 2016.
Income threshold for repayment of Higher Education Loan Programme (HELP) debts commencing 2016-17 will be reduced and will just indexation for HELP debts from 1 June 16. HELP debts will be adjusted from the Consumer Price Index to a rate equivalent to the yields on 10 year bonds issued by the Australian Government , capped at 6%, starting June 1st 2016.
SUMMARY
The Government’s argument for drastic cost cutting policies is to tighten the countries excessive spending but in doing so it has caused derision from the general public, numerous lobby groups and even State Governments. The Government may argue that this is the massive medicinal budget the nation needs to fix the ailing economy but it is going to have a hard time making everyone swallow that pill.
The Government’s argument for drastic cost cutting policies is to tighten the countries excessive spending but in doing so it has caused derision from the general public, numerous lobby groups and even State Governments. The Government may argue that this is the massive medicinal budget the nation needs to fix the ailing economy but it is going to have a hard time making everyone swallow that pill.
How much of the above razor budget changes will see the light of day will depend on the Government getting its budget passed through the senate. However with the current composition in the senate the Government will no doubt be engaged in some long drawn out negotiations with numerous stakeholders to get what they want.
With the budget presented we all now know what the Government wants to achieve and how they plan to do it but for now we just have to wait for the senate to determine how big this budget pill will be for us to swallow.
With the budget presented we all now know what the Government wants to achieve and how they plan to do it but for now we just have to wait for the senate to determine how big this budget pill will be for us to swallow.
