The message in the lead up to the 2014 Federal budget was the days of entitlements were over and everyone is required to contribute to repairing the deficit. A 2014 Federal budget summary outlining some of the key changes impacting individuals, families and businesses is below.
A temporary levy of 2% will apply to incomes about $180,000 from 1 July 2014 to 30 June 2017. In addition to this, the Medicare levy increases from 1 July 2014 from 1.5% to 2% making the top marginal tax rate 49% for those earning above $180,000 (assuming Medicare levy surcharge does not apply).
The superannuation guarantee (SGC) rate will increase from 9.25% to 9.5% from 1 July 2014. The SGC will increase by 0.5% each year from 1 July 2015 until it reaches 12%.
The eligibility age for the aged pension will increase to 70 by 2035. From 1 July 2025 the age pension age (qualifying age of 67 will apply from 1 July 2025) will increase 6 months every 2 years until 1 July 2035.
The mature age tax offset is to be abolished on 1 July 2014 and is replaced by an incentive offered to employers who hire mature age workers aged 50 years or over, who have been receiving income support for at least 6 months. Eligible employers will receive incentives of $3,000 after 6 months of full time employment, another $3,000 after 12 months of employment, then $2,000 after 18 months of full time employment and a final $2,000 after 24 months of employment.
A reduction to the income threshold for HELP and HECS debts will apply from the 2016/17 financial year. Indexation to HELP and HECS loans on 1 June 2016 will be applied using the yield rate on a government 10 year bond instead of the traditionally lower Consumer Price Index.
The eligibility age for Newstart Allowance and Sickness Allowance will increase from 22 to 24 years of age from 1 January 2015. In addition to this, any new claimants for Newstart Allowance or Sickness Allowance who are aged under 30 must demonstrate active participation in job seeking for a period of 6 months before receiving any payments. After 6 months any claimants under 30 will be required to participate in a Work for the Dole program which requires 25 hours of work per week. The waiting period of 6 months may be reduced where there is evidence of prior workforce participation.
Family tax benefit (FTB) payments are to be paid at the same rate for 2 years from 1 July 2014. The FTB part B annual income threshold for the primary earner decreases from $150,000 to $100,000 commencing on 1 July 2015. The FTB part B will also be limited to families whose youngest child is 6 years of age from 1 July 2015. A transitional measure will allow families receiving FTB part B with a child over 6 years on 1 July 2015 to continue receiving these payments for 2 years.
Most dependant tax offsets are to be abolished from 1 July 2014 including the dependant spouse tax offset and housekeeper offset.
A $7 patient contribution fee will need to be paid to your GP from 1 July 2015 and a $5 prescription fee will apply from 1 January 2015 for each script that is given for prescriptions subsidised by the government’s Pharmaceutical Benefits Scheme. Concession card patients and kids under 16 only have to pay the contribution for the first 10 visits during the year and Concession card patients have their prescription fee limited to $0.80 per script.
Fuel excise is to be indexed against inflation twice a year. This is estimated to increase fuel costs by approximately one cent a litre per year. There are to be likely flow on affects with these higher costs for goods requiring transport to be passed onto the consumer.
There is a cut in the company tax rate from 30% to 28.5% from 1 July 2015. For large businesses the tax cut is offset by a 1.5% levy for Paid Parental Leave.
Fringe benefits tax rate is to increase to 49% to align itself with the increase in the top marginal rate for individuals. Not for profits and public benevolent institutions are to have their FBT exempt caps increased.
There is uncertainty about small business asset write off threshold as the threshold of $6,500 was meant to be decreased to $1,000 from 1 January 2014 as the original legislation to have this reduced was defeated in the Senate. This was not addressed in the budget so there is uncertainty if the new threshold will apply from 1 January 2014 when this is reviewed in the future.
R&D offset rates will be reduced by 1.5%. The refundable R&D offset will now be 43.5% and the non refundable offset 38.5% from 1 July 2014.
Employee share scheme tax reform has unfortunately been put on hold. This would be a major disappointment for most start-ups especially when the government flagged this as one of the areas up for reform when they took office.
If you have any questions about the budget you can contact us here.