Federal Budget 2014 - What this means for you!

'Contribute & Build'

After the National Commission of Audit Report and the many budget leaks together with the chattering of commentators, Treasurer Joe Hockey has (finally) handed down his first Budget. This year’s mantra of ‘contribute and build’ seems to perfectly sum up the central themes of this Budget. In old sporting parlance “take one for the team” means that Australians are being asked to “take one for Australia”.

It is important to note the Budget announcements are still only proposed at this stage and that, to be legislated under the new Senate, the Government will need the support of six of the record 18 crossbench Senators.

Superannuation

Excess non-concessional contribution withdrawals
Date of effect: 1 July 2013

Individuals who make contributions exceeding their non-concessional contribution cap from 1 July 2013 will have the option to withdraw the excess amount, plus earnings on the excess. No tax will be payable on the excess amount withdrawn. However, withdrawn earnings will be taxed at the individual’s marginal tax rate. If no election is made to withdraw the excess contributions, the excess will be taxed under the existing regime at the top marginal tax rate.

There will be further consultation with key superannuation industry stakeholders before details of this measure are finalised.

Revised SG rate increase
Date of effect: 1 July 2014

While the Superannuation Guarantee (SG) rate will still increase to 12%, the schedule for this increase will be amended.

The Government confirmed that the legislated increase to 9.5% will take effect on 1 July 2014. It is proposed that the rate will remain at 9.5% for four years and from 1 July 2018, it will increase by 0.5% pa, before reaching 12% on 1 July 2022 (a year later than originally scheduled).

Cessation of First Home Saver Accounts scheme
Date of effect: 13 May 2014

While the Superannuation Guarantee (SG) rate will still increase to 12%, the schedule for this increase will be amended.

First Home Saver Accounts (FHSAs) opened any time after Budget night will no longer qualify for concessions. From 1 July 2014, the Government co-contribution that is currently paid to these accounts at a rate of 17% of personal contributions made per financial year (to a maximum of $1,020 per year) will cease. From 1 July 2015, the existing tax concessions and social security income and assets test exemptions applied to these accounts will end. Restrictions on withdrawals will also cease from 1 July 2015.

Increase in Age Pension age to 70Social Security

Date of effect: 1 July 2025

 

The Age Pension age will increase to 67.5 from 1 July 2025. It will then continue to rise by six months every two years, until the pension age reaches 70, by 1 July 2035. Those born before 1 July 1958 will not be affected by this change. Currently, the Age Pension age is due to increase from 65 starting on 1 July 2017 and gradually reach 67 by 1 July 2023.

Income support payment indexation
Date of effect: 1 July 2014 and 1 September 2017

The indexation rate will change to the Consumer Price Index (CPI) for a number of payments. The indexation change will apply to the Parenting Payment (Single) from 1 July 2014.

Indexation changes from 1 September 2017 will apply to:

  • Pensions (including Age Pension, Disability Support Pension, Carer Payment and DVA service pensions), and
  • Bereavement Payment.

Payments are currently indexed in line with the higher of:

  • CPI
  • Male Total Average Weekly Earnings, or
  • Pensioner or Beneficiary Living Cost Index.
  • Generally CPI is the lowest of these.

Eligibility threshold freezes
Date of effect: 1 July 2014 and 1 July 2017

The eligibility thresholds for non-pension payments will be frozen for three years from 1 July 2014. Non-pension payments include:

  • Family Tax Benefit
  • Child Care Benefit
  • Child Care Rebate
  • Newstart Allowance
  • Parenting Payments, and
  • Youth Allowance.

Eligibility thresholds for pension payments will be frozen for three years from 1 July 2017. Pension payments include:

  • Age Pension
  • Carer Payment
  • Disability Support Pension, and
  • DVA Service Pension.

Increasing cost of medical care
Date of effect: 1 July 2015 and 1 January 2015

A patient contribution of $7 to be charged from 1 July 2015, for:

  • general practitioner consultations, and
  • out-of-hospital pathology and diagnostic imaging services.

Holders of concessions cards and children under 16 years of age can only be charged for the first 10 visits in a year. Visits beyond the first 10 will require no patient contribution.

This announcement also lifts the restriction on State and Territory Governments charging patients at hospital emergency departments for general practitioner like consultations.

Co-payments under the Pharmaceutical Benefits Scheme will increase from 1 January 2015 by:

  • $5 for general patients from $37.70 to $42.70, and
  • $0.80 for concessional payments from $6.10 to $6.90.

The safety net threshold will increase from 1 January 2015 for four years by 10% each year and the concessional safety net by two prescriptions per year.

Family Tax Benefit changes
Date of effect: Various

A number of amendments have been announced in relation to eligibility and payment rates for the Family Tax Benefit (FTB), and associated supplements and allowances.

Payment rates

From 1 July 2014, the maximum and base rates of the FTB Part A and B will be frozen until 1 July 2016.

The FTB Part A and B end of year supplements will be returned to their original values and indexation will cease from 1 July 2015. The supplements will reduce from:

  • $726.35 to $600 for FTB Part A, and
  • $354.05 to $300 for FTB Part B.

Eligibility thresholds

The FTB Part A per child add-on, which currently increases the higher income free threshold for each additional child, will be removed from 1 July 2015. Under existing arrangements, a family may qualify for FTB Part B if the primary income earner has income up to $150,000 pa. This will be reduced to $100,000 pa from 1 July 2015.

Eligibility

From 1 July 2015, payment of FTB Part B will be limited to families whose youngest child is under the age of six. Families already in receipt of FTB Part B, whose youngest child is aged six or over on 30 June 2015 will remain eligible for FTB Part B under the transitional measures for an additional two years.

Other changes

From 1 July 2015, a new Family Tax Benefit Allowance will be made available to single parents receiving the maximum rate of FTB Part A, whose youngest child is aged 6 to 12. This will apply from the time they become ineligible for FTB Part B. An additional payment of $750 will be paid for each child aged 6 to 12.

Commonwealth Senior's Health Card (CSHC)

CSHC indexation
Date of effect: 20 September 2014

The income thresholds for eligibility for the Commonwealth Seniors Health Care Card will be indexed from 20 September 2014 to the Consumer Price Index. Indexation may allow additional clients to become eligible for this card.

CHSC income definition
Date of effect: 1 January 2015

The definition of income for the Commonwealth Seniors Health Care Card will be expanded. From 1 January 2015, an amount will be included in the income test based on an account based pension being subject to deeming. This brings the treatment in line with the deeming of income streams for social security recipients.

Grandfathering rules will apply to those clients already eligible for the CSHC. The new rules will apply to new applications from 1 January 2015.

Cessation of the Seniors Supplement Date of effect: 20 Sept14

From 20 September 2014, the Seniors Supplement will no longer be payable to holders of the Commonwealth Seniors Health Care Card. However, holders of the card will still receive the Clean Energy Supplement.

The Clean Energy Supplement will not be indexed from 1 July 2014. This supplement is payable to both income support recipients and CSHC holders.


Temporary Budget Repair Levy on income over $180,000

Income tax

Date of effect: 1 July 2014 to 30 June 2017

A levy of 2% will apply to an individual’s taxable income over $180,000 per annum for three years from 1 July 2014. In addition, the rate of Fringe Benefits Tax (FBT) will also increase to 49% to prevent high income earners from using fringe benefits to avoid the levy. The increase in the FBT rate will be from 1 April 2015 to 31 March 2017 to align with the FBT year.

Reduction in company tax rate 
Date of effect: 1 July 2015

The company tax rate will be reduced by 1.5% to 28.5% from 1 July 2015. For companies earning more than $5,000,000 in taxable income, this reduction will be offset by the 1.5% levy to fund the paid parental leave scheme which also commences from 1 July 2015.

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