14 May Federal Budget 2013 / 2014
Here is a quick snapshot of some of the changes:
Harder tax time for families
This year’s budget was not a typical election year budget instead of vote pleasing tax cuts, the Government focused on bringing down a “financially responsible budget”, which may be hard on families.
Spending increase for education and health
There are two areas that will see a increase in spending which are :
– the Gonski Reforms to education at a cost of $9.8 billion over six years and;
– Disability Care Australia costing $14.9 billion over seven years.
Both are part of the Government’s aims to build a better smarter and fairer nation.
A Huge deficit – more broken promises
Bringing in last year’s budget promise to return a surplus in 2013/2014 the Government revealed a deficit of 19.4 billion.
The treasurer Wayne Swan is now claiming that this year’s Budget will bring us back in the black – but not until 2016/17. Not sure how this can be predicted given the government cant even get close to a 1 year forecast?
Medicare Levy will increase
From the 1st of July 2014 the Medicare Levy will be increased by 0.5%, from 1.5% of taxable income to 2% of taxable income.
This increase in income will fund Disability Care Australia, formerly the National Disability Injury Scheme (NDIS).
Baby Bonus to be renamed and reduced
The Baby Bonus will remain in place until 28 February 2014, nine-and-a-half months from now. Interesting time line. So the current bonus which is applicable to those with:
– incomes of up to $150,000 a year will receive $5000 on the birth of their first child and $3000 for each subsequent baby.
After 1 March 2014, the qualifying threshold will drop significantly.
– Couples earning over $101,000 will not be eligible for a bonus for their first baby.
– The threshold for a second baby will be about $112,000.
Eligible families, the Baby Bonus will be reduced to $2000 for the birth or adoption of a first child or each child in multiple births and $1000 for second or subsequent children. This will be paid through an initial payment of $500 with the remainder paid in seven fortnightly installments.
Changes to Superannuation
A higher concessional contribution cap of $35,000 will apply to people aged 60 and over from 1 July 2013.Great news! This should help most of our clients although we would of preferred the $50,000 cap.
The higher cap will then become available to people aged 50 and over from 1 July 2014.
The cap will not be indexed in future years and it’s projected that the existing concessional cap will reach $35,000 in July 2018 when the caps will again apply to everyone regardless of age. A long time to wait for everyone else.
The requirement to have less than $500,000 in total superannuation savings has now been scrapped. That’s a great outcome.
Excess super contributions will be able to be withdrawn and can be taxed personally at their marginal tax rate. An interest charge will be levied reflecting the delay in collection by the ATO.
The tax-free treatment of assets in supporting a superannuation income stream will be limited to the first $100,000 of earnings on those assets.
Earnings above the $100,000 limit will be taxed at 15%. We are already starting to work on solutions for our clients.
For those earning over $300,000 in income, will be charged an additional tax of 15% on all your superannuation contributions.
Other budget items:
Net Medical Expense Tax Offset in 2014/15 has been removed.
Personal income tax cuts which were due to begin in July 2015 will be deferred until at least July 2018.
Aged pensioners who wish to downsize their home, can hold up to $200,000 in assets from the sale of their home before the assets test kicks in. That’s a nice initiative.