The 2014 Federal Budget announced on Tuesday 13th May saw many new proposed changes to the budget that may affect you as our clients. We have compiled a list of the main budget changes that may affect you and your accounting processes. If you have any questions on how any of these changes may affect you, your family or your business, please feel free to get in contact with us.
Individuals and families
1. Temporary Budget Deficit Levy: The budget deficit levy is set to hit 400,000 high income earners. If you earn more than $180,000 a year, you will be hit with an additional 2% tax from July 1 until mid-2017. This is a temporary levy and will apply for 3 years. This levy will contribute an extra $3.1 billion over four years. To prevent high income earners from using Fringe Benefits Tax (FBT) to avoid the deficit levy, the FBT rate will be increased from 47% to 49% from 1 April 2015 until 31 March 2017. These caps will not apply to tax-exempt charities and not-for-profits.
2. Dependent spouse tax offset (DSTO) to be abolished: From 1 July 2014, the DSTO will be abolished for all tax payers. This measure is estimated to gain a revenue of $320m.
3. Mature age worker tax offset (MAWTO) to be abolished: From July 1 2014, the MAWTO will be abolished. This measure is estimated to gain revenue of $760m.
4. First Home Saver Accounts (FHSA) scheme to be abolished: From 1 July 2015, the FHSA scheme will be abolished. Any new account opened from now on will not be eligible for concessions. The Government co-contribution will cease from 1 July 2014. Account holders will be able to withdraw their account balances without restriction from 1 July 2014. This will contribute to savings of $134.3m over five years.
5. Medicare levy low-income threshold for families increased: This threshold will be increased from the 2013/14 income year. The threshold for couples with no children will be increased to $34,367, and the additional amount of threshold for each dependent child or student will be increased to $3,156 for 2013/14.
6. Tax receipts for individuals: The ATO will issue a receipt to taxpayers to show in dollar terms how their taxes were spent on each budget area. This will be issued along with their notice of assessment.
7. Changes to HELP repayment thresholds, indexation, and loan fees
New minimum repayment threshold: The income threshold when students will be liable to commence repaying off their Higher Education Loan Programme (HELP) debts will be reduced coming into effect 1 July 2016. The new minimum threshold is currently estimated to be $50,638 in 2016/17. A new repayment rate of 2% of income will be applied to those with incomes above the new threshold.
Indexation changes: The annual indexation applied to HELP debts will be adjusted from the Consumer Price Index (CPI) to a rate equivalent to the yield on 10 year bonds issued by the Government (capped at 6% per annum) from 1 June 2016.
Loan fees: The Government will continue to make HELP loans available so students do not have to pay their fees upfront. The HECS-HELP benefit which was intended to provide an incentive for graduates of particular courses to take up related occupations or work in specified locations will end from 2015-16. Also, the 25% loan fee applied to VET FEE-HELP loans for full-fee paying students in higher level vocational and training courses will be removed from 2015/16.
8. Pensioners
Pension age: The qualifying age for the pension will increase by six months every two years. The new qualifying pension age will be 70 by 1 July 2035. This change will not affect those born before 1 July 1958.
Income test: There will be changes as to how the Government deems the return from a person’s financial assets for the purposes of the pension income test. The threshold will be reset from $46,000 to $30,000 for single pensioners and from $77,000 to $50,000 for pensioner couples from 1 September 2017. The family home will be excluded from pension means tests.
Indexation changes: The indexation of income and assets test free areas for the pension will be paused for three years from 1 July 2017.
Commonwealth Seniors Health Card: The Government says it will provide $95.8m over 5 years from 2013-14 to index current income limits for the Commonwealth Seniors Health Card by the CPI from September 2014. The Government will also cease the Seniors Supplement for holders of the Commonwealth Seniors Health Card (CSHC) from 20 September 2014.
9. Newstart Allowance
The Government will increase the age of eligibility for Newstart Allowance and Sickness Allowance from 22 to 24 years of age commencing from 1 January. Current recipients aged 22 to 24 years old at 31 December 2014 will remain on these allowances. This will contribute to savings of $508.1m over 5 years. Along with this, no Newstart allowances will be distributed for six months for new job seekers under 30. After six months, you must work 25 hours per week and work for the dole to receive income support for six months.
10. Family Tax Benefit Reforms and new single parent benefit
- The Government will limit the Family Tax Benefit Part A Large Family Supplement (currently $313.90 per child per annum) to families with 4 or more children from 1 July 2015. Saving $377.7m over 4 years.
- There will also be a 2-year freeze on rates.
- The Government announced it will reduce the Family Tax Benefit Part B primary earner income limit from $150,000 per annum to $100,000 per annum from 1 July 2015. The income threshold for the Dependent Tax Offset will also be reduced to $100,000.
- The Government will limit the Family Tax Benefit Part B to families whose youngest child is younger than 6 years of age from 1 July 2015. Families with a youngest child aged 6 and over on 30 June 2015 will remain eligible for 2 years. Contributing to savings of $1.9bn over 5 years.
- The Family Tax Benefit Part A per child add-on will be removed from 1 July 2015. With an expected $211.2m in savings.
- The Government will provide $155m over 4 years as an allowance for single parents on the maximum rate of Family Tax Benefit (FTB) Part A whose youngest child is aged between 6 and 12 years old from the point they become ineligible for FBT Part B. An allowance of $750 per child will be allocated.
- The FTB Part A and Part B end of year supplements will return to their original amounts of $600 per annum for each FTB Part A and $300 per annum for each FTB Part B Family and cease indexation.
11. Changes to Medicare
Patient contributions: The Medicare Benefits Schedule (MBS) rebates will be reduced from 1 July 2015 by $5 for standard GP consultations and out-of-hospital pathology and diagnostic imaging services. Providers of these services will be allowed to collect a patient contribution of $7 per service. For patients with concession cards and children under 16 years old, the MBS rebate will only be reduced for the first 10 services each year. State and Territory Governments may also charge patients who go to hospital emergency departments for reasons that could have been resolved by a GP. On 1 July 2015, the MBS rebates will be introduced and providers will be allowed to collect the patient contribution. Access to cheap medicines will be tightened and an extra co-payment of $5 per PBS script.
Medicare safety net: The Original Medicare Safety Net, Extended Medicare Safety Net and Greatest Permissible Gap will be replaced by the new Medicare Safety Net. There will be new safety net thresholds of $400 for concessional singles and concessional families, $700 for non-concessional Family Tax Benefit Part A (FTB-A) and non-concessional singles, and $1,000 for non-concessional families who do not receive FTB-A.
Companies, finance and not-for-profits
1. R&D tax incentive: The rates of refundable and non-refundable offsets for the R&D Tax Incentive will be reduced by 1.5 percentage points. This will come into effect 1 July 2014.
2. Company tax cuts: The Government will be cutting the company tax rate by 1.5 percentage points (to 28.5%) from 1 July 2015. For large companies, the reduction will offset the cost of the Government’s 1.5% Paid Parental Leave Levy.
3. Incentives to employ those aged over 50 or who have been unemployed for at least six months: A Small Business and Family Enterprise Ombudsman will be established to act as a one stop shop and single entry point for all small businesses to find out about Government services and programs.
1. Excess contributions: People who pump too much money into their super funds will no longer be hit with penalties.This means super savers will be able to withdraw their excess contributions rather than have to pay a penalty. The Government will allow individuals the option of withdrawing superannuation contributions in excess of non-concessional contributions cap made from 1 July 2013 and any associated earnings, with these earnings to be taxed at the individual’s marginal tax rate.
2. Rescheduling increase in superannuation guarantee rate: The superannuation guarantee rate will now increase to 9.5% on 1 July 2014, this rate will remain until 30 June 2018 when the rate will then increase by 0.5 percentage points every year until it reaches 12% in 2022/23.
Fuel
Fuel excise: The fuel excise is set to rise, except for aviation, with the indexation to be re-established. Biannual indexation by the CPI of excise and excise equivalent customs duty will be reintroduced for all fuels, except aviation fuels. This will commence from 1 August 2014 and is expected to generate $2.2bn which will be reinvested in building new and upgrading existing road infrastructure.
If you would like to speak with a knowledgeable and experienced accountant with regard to any of the above budget-related information; please don’t hesitate to get in touch with the team at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
