Analysts say the 2013 Budget measures contained no real surprises and few measures to excite businesses or stimulate the economy and financial markets away from current trend levels. The changes announced are unlikely to change the Reserve Bank's easing interest rate bias, the Australian dollar is expected to react negatively to the large budget deficit announced for 2013/14 and 2014/15, however, a lower dollar in itself should be positive for our export related companies and sectors such as resources.
Tough time for families
Despite being only months away from a Federal Election, the Government has made changes that may be potentially harsh on ordinary families. Some of the changes are:
¨ Tax cuts due to come into effect from 1 July 2015 have been deferred.
¨ The Medicare Levy has been increased by 0.5% from 1 July 2014.
¨ The Net medical expense tax offset will be phased out from 1 July 2013 (so bring forward to this year any major out of pocket medical expenses to remain eligible for the NMETA in future years—Ed).
¨ Under the Higher Education Loan Program (HELP), the 10% discount for paying fees upfront and the 5% bonus on voluntary payments to the ATO of $500 or more will be removed.
¨ A number of changes to Part A and Part B of the Family Tax Benefits eligibility and payment criteria reduce payments to families. Indexation on the eligibility thresholds have been deferred until 1 July 2017. Supplement rates have been maintained at current levels.
¨ Reduction to the amounts paid under the Baby Bonus from 1 March 2014 as well as tighter eligibility for the payments (however a new lower threshold scheme is proposed to take its place. Our advice, you have 9 months and 2 weeks before the change is in force — get to work! Ed).
¨ Indexation on the Child Care Rebate cap paused until 30 June 2017.
Major Super Changes
¨ For the 2013/14 financial year, the higher cap of $35,000 will apply to individuals who are aged 59 years or over on the 30th of June 2013. For the 2014/15 year onwards, the higher cap will apply to individuals who are aged 49 years or over on the 30th of June of the previous financial year (we love the simplicity of super—Ed).
¨ Individual super income streams that have an income in excess of $100,000 will be taxed at 15% on that excess income (we believe that this is not the real concern, it is the impact of this change combined with the impact of the change to capital gains tax, read further on—Ed).
¨ Changes to the $0 tax treatment of capital gains on assets held in pension phase so gains after 1 July 2014 are included as part of the $100,000 income for tax assessment purposes (with a 10 year grandfathering provision—Ed).
¨ An additional 15% tax on all super contributions for those earning over $300,000. Income is defined as taxable income, SGC payments, reportable fringe benefits plus total net investment losses.
¨ From 1 July 2013, excess super contributions will be taxed at the individual’s marginal tax rate, plus an interest charge (we believe this is a good change as it will minimise any over contribution impost—Ed).
¨ Lost super account balances increased from $2000 to $2,500 from 31 December 2015 to $3,000 from 31 December 2016.
¨ Trusts, super funds, sole traders, large investors & large entities (turnover of $20 million or more) required to pay monthly PAYG instalments.
¨ Work related self-education expense deductions capped at $2,000 annually from 1 July 2014 (it is worth noting that employers don't have a cap and this expense has no FBT as long as it is not salary sacrificed, worth considering—Ed)
¨ From 1 January 2015, the income generated in all new allocated pensions will be subject to Centrelink deeming rules (this will reduce the upper limit for pensioners being impacted by the incomes test and cause issue for people needing to change providers—Ed).
¨ The income free period for all Newstart, Sickness, Parenting and Widow allowances & payments will increase from $62 per fortnight to $100 a fortnight (a welcome change– Ed).
¨ A new pilot offering a means test exemption for Age Pensioners & those over age pension age who are downsizing from their family home (the catch, you must own your home for at least 25 years—Ed).
Much of the above information has been taken from various sources, including Asgard, CFS, OnePath and AMP, as well as our own thoughts.