Another budget announced last night, and I’m sure the media has surely hammered the government enough over the size of the deficit in a year that we were promised a surplus, so we won’t mention it here (oops!). As is the case every year, I have attached a summary of the budget and some commentary provided by Colonial, who I find generally has the easiest to read Budget summary.
Some points however that I think are important to highlight and would be of interest to most are:
Increase in Medicare Levy
One of the main points of the budget was the news that from 1 July 2014 the Medicare Levy will be increased by 0.5%, from 1.5% of taxable income to 2% of taxable income. The Levy will apply to all those taxpayers who are currently subject to the Medicare Levy. This will fund Disability Care Australia, formerly the National Disability Injury Scheme (NDIS).
Baby Bonus to go
The Baby Bonus will remain in place until 28 February 2014, nine-and-a-half months from now, so those who were keen and thought they’d just make it in last night may get lucky. This will mean that until then, 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. For those eligible, 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 instalments.
There were 4 main changes to Superannuation (announced prior but reiterated in the budget)
- Good news with the introduction of a higher concessional contribution cap of $35,000 will apply to people aged 60 and over from 1 July 2013. 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 is projected that the existing concessional cap will reach $35,000 in July 2018 when the caps will again apply to everyone regardless of age. While the higher cap is now less than the $50,000 promised to come into effect from 1 July 2014, the requirement to have less than $500,000 in total superannuation savings has been removed.
- Excess contributions will be able to be withdrawn by individuals who will be able to have them taxed personally at their marginal tax rate. An interest amount will also apply to the excess amount, 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 that will be taxed at 15%. It is expected that this threshold will be indexed to CPI and increase in $10,000 increments.
- For those earning over $300,000, the Government will be imposing an additional tax of 15% on all of your super contributions.
As always, we will be addressing these changes in the context of individual client circumstances and informing you in changes to your circumstances require any attention.
In the meantime, if you have any queries please do not hesitate to contact us.
