It is Budget time again. There were no real surprises as most of the cats were let out of their respective bags over recent months, in particular, in the area of Super. The most positive of these changes directly relates to the Concessional Contributions Cap (which include your superannuation guarantee and salary sacrifice contributions):
- “The Government has proposed to introduce an unindexed $35,000 concessional contributions cap to anyone who meets certain age requirements.
- The start date for the new cap is 1 July 2013 for people aged 60 and over. From 1 July 2014, the $35,000 will apply for those aged 50 and over.
- Those who do not meet the aged based requirements, will be subject to the ordinary concessional contributions cap which is currently $25,000. It is anticipated that this threshold will be indexed to $35,000 by 1 July 2018.”
What follows below is a quick Budget snapshot, which has been prepared by BT Funds Management Ltd. (For those of you who would prefer a more detailed account of the this year’s Budget, please follow the link to BT’s Federal Budget Update 2013 Investor Debrief
As always, if you read anything in this article that you think may be of relevance to your personal situation and would like to know how you may be impacted, please do not hesitate to “contact us to arrange a time to discuss how your current plans and strategy may be affected. (Our offer is not limited to this article. Any other time you read, hear, or see something on TV, that may raise questions or concerns, please feel free to call.)
I hope you find the following article informative:
Federal Budget 2013/14: a sober budget for election year
Tough tax time for families
Despite being only months away from a Federal Election, this year’s budget was not a typical election year budget. Instead of crowd-pleasing tax cuts, the Government focused on bringing down a “financially responsible budget”, that some commentators suggested will be harsh on ordinary families.
Spending boosts for education and health
Two areas that will see a boost in spending are the Gonski Reforms to education at a cost of $9.8 billion over six years and DisabilityCare Australia costing $14.9 billion over seven years. Both are part of the Government’s aims to build a smarter, fairer nation.
A big deficit
Reneging on last year’s Budget promise to return a surplus in 2013/2014 the Government revealed a deficit of 19.4 billion with Treasurer Wayne Swan claiming that this year’s Budget will bring us back in the black – but not until 2016/17.
The verdict: “It was not as bad as we thought it was going to be,” BT Financial Group Chief Economist Chris Caton said. “If we hadn’t gone into the Budget with as much negative feeling and credibility gap, it would look like a pretty good document.”
Increase in Medicare Levy
One of the main points of the budget was the news, previously announced, 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 DisabilityCare Australia, formerly the National Disability Injury Scheme (NDIS). The Disability care program had already been discussed as well as its funding through the lifting of the Medicare Levy.
Baby Bonus to go
The Baby Bonus will remain in place until 28 February 2014, nine-and-a-half months from now. 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.
4 main changes to Superannuation (announced prior but reiterated in the budget)
– 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’s 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 your super contributions.
Other budget items of note include:
– The abolition of the Net Medical Expense Tax Offset in 2014/15.
– The deferral of personal income tax cuts which were due to begin in July 2015 to help with carbon tax. Expected to be deferred until at least July 2018, these changes apply to all individuals, although are not substantial in their impact.
– The announcement of a pilot scheme to assist aged pensioners who wish to downsize their home, where they will be able to hold up to $200,000 in assets from the sale of their home before the assets test kicks in.
FOR GENERAL INFORMATION ONLY
This information has been prepared by BT Funds Management Ltd ABN 63 002916 458 and the information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation and needs.
The above information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. The information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. Any taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.
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