Download 2014 federal budget summary

2014 FEDERAL BUDGET SUMMARY
Corner Lime & Cuthbert Streets
King Street Wharf
Sydney NSW
Phone: (02) 9249 7600
[email protected]
www.bellpartners.com
CEO Message
The words “promise” and “commitment” have been
thrown around quite a bit by both sides of
parliament leading up to this year’s budget.
The Labor party has been keen to highlight thatthe
proposed Deficit Levy breaks Tony Abbott’s preelection comments that "taxes will always be lower
under a Coalition government.”
Whilst the Coalition has been at pains to highlight
that they have a commitment to protect Australia’s
economy and financial position and that “when
you're in a difficult position, sometimes there needs
to be some short-term pain for permanent and
lasting gain."
Whatever your political persuasion, most people would agree that clear direction
and swift action are needed to ensure the nation’s long term financial health.
The national financial scorecard for the last twelve months would best be described
as mixed.
On the positive side we’ve seen the Australian dollar drop slightly from
uncomfortable highs leading to a late run in exports, business and household
sentiment improving especially following the September election, the RBA cutting
rates to 2.50% where they have remained since and a late pickup in the housing
construction sector.
Yet we’ve also seen the economy slowing following a drop off in the investment
phase of the mining boom, unemployment levels edging higher throughout most of
the year, further uncertainty finding its way to Australian shores with spending cuts
in the US and issues around China’s financial system and the general volatility that
has plagued many markets.
The Government has released a budget which they say will fire up the non-mining
sectors of the economy, with $50 billion to be invested in new roads, rail, ports and
airports over the next decade.
This budget also sees a significant commitment to health and medical research with
a $20 billion medical research endowment, new free trade agreements with Korea
and Japan, the removal of $1 billion annually in red tape and the abolition of the
carbon tax and mining tax.
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There are also initiatives which will ensure Australia is well positioned globally in
education with the deregulation of higher education fees and Government support
provided to those learning a trade.
That said these initiatives and the need to decrease government spending and
reduce benefits have come at a cost to many families and pensioners. A 2%
Temporary Budget Repair Levy for people earning more than $180,000 a year,
changes to the accessibility of the aged pension and family assistance payments,
the introduction of a $7 Medicare co-contribution and the re-introduction of
indexation of the fuel excise are among the changes.
It also has to be said that there is little in the way of true tax reform in this budget,
with negative gearing and superannuation in particular being left unchanged.
The budget deficit is projected to fall from its current $49.9 billion to $29.8 billion
next year, with a further decline to $2.8 billion in 2017-18. This will be seen by
many as the Government delivering on its promise to “fix the economy”.
It’s a fine line the Government is trying to walk with a need and indeed action to
reduce spending so as a country we live within our means, yet at the same time not
wanting to dampen confidence and hence economic growth.
There will no doubt be positive and negative ramifications for you from this budget.
I encourage you to contact us for specific advice as to what these changes may
mean for you.
I hope that you find this Budget Summary useful.
Warm regards,
Anthony Bell
Accounting & Tax, Strategy & Advisory, Audit, Wealth Creation, Stockbroking, Finance, Legal, Communications, Digital & Insurance
Budget Highlights
We're pleased to provide the following summary of some of the major changes
arising from this year's Federal Budget.
This report aims to summarise the key implications that might be relevant to you,
but it is not exhaustive. We would be happy to assist with any questions you may
have regarding how these changes may affect you.

$50 billion over the next 10 years for key infrastructure projects (particularly
roads, rail, ports and airports).

Reintroduction of the indexation of the fuel excise with money raised to
contribute towards the road-building budget.

Establishing the $20 billion Medical Research Future Fund to be financed by,
inter alia, the $7 Medicare co-contribution.

Temporary Budget Repair Levy of 2% on incomes over $180,000 for 3 years
commencing 2014-15.

Increase in the pension age eligibility to 70 by 2035 whilst starting to
incentivise businesses to employ Australians over the age of 50 through the
new Restart programme.

$820 million to expand access to higher education and deregulating tuition
fees from 1 January 2016.

Intention to reduce the corporate tax rate by 1.5 percentage points to 28.5%
from 1 July 2015 for 800,000 businesses.
In addition to the budget itself there have been many changes that have been
announced in prior budgets that are not yet law but are important to consider. Our
report addresses some of the major points.
The Economy - Forecast at a glance

The current $49.9 billion deficit is projected to be reduced to $29.8 billion in
2014-15, falling to $2.8 billion in 2017-18.

Growth at 2.5% for 2014/15 increasing to 3.0% for 2015-16.

Unemployment rate is forecast to be 6.25% by the June quarter 2015.

Net debt projected to rise to 14.6% of GDP by 2016-17.
Budget Summary
Area
Impact
Effective
Date
Individuals & Families
Temporary Budget
Repair Levy
Budget repair (deficit) levy of 2% will apply for
incomes over $180,000 for 3 years (until 30
June 2017).
Dependent Spouse
These tax offsets will be abolished.
Tax Offset and Mature
Age Workers Tax
The government will make a payment of up to
Offset
$10,000 to employers who hire a senior job
seeker to support mature age seekers in reentering the workforce.
Age Pension
The age pension qualifying age will continue to
increase by six months every two years until it
reaches a qualifying age of 70 by 2035. This
means that anyone born after 1/1/66 will not
qualify until age 70.
1/7/14
1/7/14
By 1/7/35
Changes to deeming rules will reduce pension
entitlement for some pensions.
Pension increases will now be linked to CPI
which will reduce the amount of future rises in
pension payments.
Medicare levy low
income thresholds
Increased to $34,367 for families (the
threshold will remain at $20,542 for
individuals).
1/7/13
Medicare Patient
Contribution
A $7 patient contribution per service will be
collected by the service provider (capped to the
first 10 visits to the doctor by concession card
holders and children under 16).
1/7/15
First Home Saver
Accounts Scheme
The scheme will be abolished on 1 July 2015.
1/7/15
The government co-contributions for first home
savers will cease on 1 July 2014.
1/7/14
HELP Repayments
The income threshold for repayments will be
reduced and the annual indexation of HELP
debt will be adjusted with a rate equivalent to
the yield on 10 year government bonds.
1/7/16
Family Tax Benefit
The Family tax benefit payments will freeze at
the current levels for 2 years.
1/7/14
The primary earner income limit for the family
tax benefit part B will be reduced to $100,000
p.a. from $150,000 p.a.
1/7/15
A new allowance of $750 for single parents;
subject to eligibility.
Business - General
Corporate Tax
Rate Reduction
Intention to cut the corporate tax rate by
1.5% to 28.5% for 800,000 businesses.
1/7/15
Fringe Benefits
Tax Rate
Change
Rate has increased from 47% to 49% due to
the introduction of temporary budget repair
levy.
1/4/15
The current rates of the refundable (45%) and
non-refundable (40%) offsets will be reduced
by 1.5 percentage points each.
1/7/14
R & D Tax
Incentive
Superannuation
Excess Contribution
Tax
The government will allow individuals to
withdraw any excess contributions made and
associated earnings.
1/7/13
If this option is used, no excess contribution
tax will be payable and any related earnings
will be taxed at marginal tax rates.
Employer
Superannuation
Guarantee Rate
The government will increase the rate to
9.5% (as currently legislated) and the rate
will remain at this level until 30 June 2018.
1/7/14
The rate then will increase by 0.5% each
year until it reaches 12% in 2022/2023.
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Other Changes
Federal budgets in prior years have included a number of announcements that come
into effect from 1 July 2014 and future periods. Some of the major ones follow.
Previous Announcements: Legislated Changes from 1 July 2014 &
Beyond
Area
Impact
Effective
Date
Medicare Levy
Increased from 1.5% to 2.0% to support the
Disability Care Australia.
1/7/14
Fringe Benefits Tax
Rate Change
Rate has increased from 46.5% to 47% due to
the increase in Medicare Levy.
1/4/14
Superannuation
Concessional
Contributions Cap
For 2013-14, $25,000 (up to age 60) and
$35,000 (age 60+).
1/7/13
For 2014-15, $30,000 (up to age 50) and
$35,000 (age 50+).
1/7/14
Previous Announcements: Not Yet Legislated
There have also been a number of changes announced in prior years’ budgets that
are yet to be legislated (passed into law) and/or have been amended in some way
since they were originally announced. Some of the key items are;
Area
Impact
Status
HECS/HELP
Discount
Discounts for upfront or voluntary payments
are to be removed from 1 January 2014.
Before
Senate
Company Loss Carry
Back Provisions
The government proposes to repeal the loss
carry back rules for assessments for the
2013/14 and later income years with effect
from 1 July 2013.
On hold
Instant Asset Write
Off (Small
Businesses)
Instant asset write off threshold of $6,500 will
be reduced to $1,000 and immediate write off
of first $5,000 for cars will be removed from 1
January 2014.
On hold
Low Income Super
The low income super contribution scheme is
Contribution ("LISC") to be abolished with effect from 1 July 2013.
On hold
Non-resident sale of
properties
Proposal
Where a non-resident sells certain taxable
property of greater than $2.5 million, the
purchaser must withhold 10% to pay to the
tax office from 1 July 2016.
Tax Rates
Resident Individual Tax Rates
Personal Income Tax Rates and Thresholds
(excluding Medicare levy)
Taxable Income ($)
0 - 18,200
18,201 - 37,000
37,001 - 80,000
80,001 - 180,000
Over 180,000
2013/14
2014/15
Rate (%)
Rate (%)
0
5
19.0
5
32.5
5
37.0
%
%
45.0
0
19.0
32.5
37.0
47.0
Medicare Levy

The Medicare levy is currently 1.5% for 2013/14 but to rise to 2% from 1 July
2014.

With Medicare levy included, the top marginal tax rate will be 49% from 1
July 2014.
Low Income Tax Offset ("LITO")

For the 2014/15 year (as for 2013/14), the maximum value of the LITO is
$445.

It begins to be phased out at the rate of 1.5 cents for each dollar of taxable
income over $37,000 and is phased out completely by $66,667.

With the low income tax offset, tax free threshold effectively becomes
$20,542.
Non-Resident Tax Rates
Non Resident Income Tax Rates and Thresholds
Taxable Income ($)
0 – 80,000
80,001 - 180,000
Over 180,000
2013/14
2014/15
Rate (%)
Rate (%)
32.5
55%
37.0
%
45.0
33.0
37.0
47.0
Medicare Levy Surcharge & Health Insurance Rebate

The Medicare Levy Surcharge applies when private health insurance cover is
not held and your / your family income (taxable income & reportable fringe
benefits & other items) exceeds the following amounts from 1 April 2014.

It is in addition to the basic Medicare Levy. The Health Insurance Rebate
provides a reduction on the health insurance premium.
Full
Entitlement
Tier 1
Tier 2
Tier 3
Taxable Income
Singles
$88,000 or less
$88,000 - $102,000
$102,001 - $136,000
>$136,000
Families
$176,000 or
less
$176,001 - $204,000
$204,001 - $272,000
>$272,000
Health Insurance Rebate
Aged under 65
29.04%
19.36%
9.68%
0%
Aged 65 – 69
33.88%
24.20%
14.52%
0%
Aged 70 or
over
38.72%
29.04%
19.36%
0%
1.25%
1.5%
Medicare Levy Surcharge
All ages

0.0%
1.0%
The income thresholds for the private health insurance offset and the
Medicare levy surcharge will be frozen for 3 years after 1 July 2015.