2014 Australian Federal Budget – important changes that affect your finances
Temporary Budget Repair Levy There was a lot of speculation before the budget was announced about the Government’s plan to have a short term levy to help fund some of the budget deficit. The levy has been announced as a 2% charge on taxable income over $180,000. While this will only affect a minority of Australians, it could affect some people who sell investment properties and have a once off significant capital gain and assessable income. If the capital gain puts your assessable income above $180,000, you will face the 2% levy also. Superannuation Guarantee Charge will increase to 9.5% Employers will need to increase the mandatory superannuation contributions to employees to 9.5%, which is an increase of 0.25%. The previous Government’s proposal was that the SGC rate would increase by 0.5% each year afterwards until reaching 12%. The new proposal is that the SGC rate will be frozen at 9.5% until 30 June 2018, and will then increase by 0.5% each financial year thereafter until reaching 12% on 1 July 2022. Choice to withdraw excess non-concessional contributions from superannuation funds This is a positive and what we feel is a common sense budget proposal. In the past, if you contributed too much to your super fund as a non-concessional contribution (after tax) you would be taxed at the top marginal rate on the extra funds. The new proposal is that from 1 July 2013 you will simply be able to withdraw the extra contributions and you will be taxed on the investment earnings on the extra funds at your marginal rate. Increase in Age Pension eligibility age There have been a few changes in the area of the age pensions and social security. The one which received significant press coverage before the budget night was the increase in the age pension eligibility age to age 70 by 2035. The table below outlines the new changes: People born between –
1 July 1952 and 31 December 1953: eligible at age 65.5
1 January 1954 and 30 June 1955: eligible at age 66
1 July 1955 and 31 December 1956: eligible at age 66.5
1 January 1957 and 30 June 1958: eligible at age 67
1 July 1958 and 31 December 1959: eligible at age 67.5
1 January 1960 and 30 June 1961: eligible at age 68
1 July 1961 and 31 December 1962: eligible at age 68.5
1 January 1963 and 30 June 1964: eligible at age 69
1 July 1964 and 31 December 1965: eligible at age 69.5
1 January 1966 and later: eligible at age 70
Cancellation of the First Home Saver Accounts These accounts had some benefits with Government co-contributions to boost the savings towards the purchase of a house. This is a tough move as the funds must be invested in cash and can only be withdrawn to purchase a house or contributed to super. If you have opened one of these accounts, most of the benefits to contribute to these have now disappeared. Paid Parental Leave This was one of the Government’s principal policies from the 2013 election and this scheme will come into place from 1 July 2015. The scheme will allow mothers that earn up to $100,000 to receive up to 26 weeks of salary, effectively allowing a maximum payment of $50,000 in total for the half year. Other changes There have been many other changes, however we have tried to pick a few of the significant changes that could affect your situation. If you have heard other news about budget changes and you would like to know how the changes may affect your financial situation and goals, please contact our office on 03 9077 0277 to arrange a free initial consultation.