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ATR – Federal Budget. Headline Announcements that may impact you and your business.

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The Federal Budget has tax implications that you should be aware of.  Here’s the latest news!  Check to see what affects you.

INDIVIDUALS

  • Deficit Levy – From 1st July, 2014, a deficit levy will be imposed on individuals with taxable incomes exceeding $180 000. From this date, the top marginal tax rate will increase by 2% to 47% (not including Medicare Levy). This rate will revert back down to 45% from 1st July, 2017. Those on lower incomes will not be impacted.
  • Co-Payment for Doctor Visits – A new co-payment charge of $7.00 will be imposed for each consultation with a General Medical Practitioner (GP). However, the number of co-payments paid by concession card holders, and those taking their children younger than 16 to the doctor, will be capped at 10 each year ($70 will therefore be the maximum liability per year for doctor visits for these people). The co-payment will come into force from 1st July, 2015.
  • Abolition of Various Dependent Tax Offsets – A number of dependency tax offsets will be abolished and replaced by a single Dependent (invalid and carer) Tax Offset, effective 1st July, 2014. The new offset will be targeted towards taxpayers who have a dependent who is genuinely unable to work, due to a carer obligation or disability. The Mature Age Worker Tax Offset will also be abolished from 1st July, 2014.
  • Stricter Rules for HELP Repayments – The new minimum threshold at which students commence to repay their HELP loan will be reduced from 1st July, 2016, to $50 638 at a new repayment rate of 2% of your income. By way of comparison, the current minimum threshold is $51 309 with a repayment rate of 4%. Furthermore, from 1st June, 2016, the indexation rate applied annually to outstanding loans will also effectively be increased.
  • Excess Contributions Tax Relief – Individuals who make excess non-concessional superannuation contributions will, backdated to 1st July, 2013, be able to avoid excess contributions tax (of 46.5%) by having the excess amounts and the earnings on these amounts refunded and taxed at their marginal tax rate. Before this change, relief from excess contributions tax was only available on concessional contributions.

 

GOVERNMENT BENEFITS

  • Family Tax Benefit Reined In – A number of Family Tax Benefit (FTB) restrictions have been imposed, including the following from 1st July, 2015:

–   FTB Part B will no longer be available where the primary earner has an income of more than $100 000 (down from the current $150 000).

–   FTB Part B will be limited to families whose youngest child is less than 6 years of age. Transitional arrangements may apply.

–   FTB Part A and Part B supplements will be reduced to $600 and $300 per child respectively.

  • Age Pension Changes – While the current rate of, and eligibility for, the Age Pension will not change, a number of reforms have been slated for the future including:

–   The Age Pension qualifying age will eventually reach 70 by 1st July, 2035. This will be achieved through a series of increases of 6 months every 2 years, from 1st July, 2025. This change will not impact those born before 1st July, 1958. To be clear, this is not the retirement age, but the Age Pension age. You can still retire and access your superannuation as early as 55 years of age.

–   From 1st July, 2017, Age Pension increases will be linked to CPI rather than male total average weekly earnings. This will result in the dollar amount of the Age Pension increasing more slowly than it otherwise would.

  • Newstart Eligibility Age Increased – The eligibility age for the Newstart Allowance and Sickness Allowance will increase from 22 to 24 years of age from 1st July, 2015.
  • New Paid Parental Leave Scheme Confirmed – The start date for the Government’s new paid Parental Leave Scheme has been confirmed as 1st July, 2015. From this date, women who give birth or adopt will be entitled to a parental leave payment equivalent to 26 weeks of their full-time salary up to $100 000. Payments will therefore be capped at $50 000. These payments will be provided entirely by the Government (not employers).

 

BUSINESS

  • Reduction in Company Tax Rate – The Government has confirmed its long-standing commitment to a company tax cut. From 1st July, 2015, the company tax rate will be cut from 30% to 28.5%.  No reduction in tax is available for other business structures (e.g. sole traders, trusts etc.).
  • Super Guarantee Rate Increased – After much uncertainty, the Superannuation Guarantee rate will from 1st July, 2014 increase to 9.5% (the Government had planned to pause the rate at the current 9.25%). The new 9.5% rate will continue to apply until 30th June, 2018, after which it will increase to 10%, and incrementally to 12% by 1st July, 2022.
  • Mature Age Worker Incentive – From 1st July, 2014, employers will be offered significant cash incentives to employ older workers. Payments of up $10 000 will be available where you hire a worker aged 50 or over who has been unemployed for six months or more. To obtain the maximum $10 000 payment, they must remain employed with you for two years.
  • Consolidation Integrity Measures – Three modifications will be made to these rules to ensure:

–   Tax consolidated groups will no longer be able to access double deductions by shifting the value of assets between entities

–   Non-residents will no longer be able to ‘churn’ assets between consolidated groups to allow the same ultimate owner to claim double deductions, and

–   The consolidation regime’s treatment of certain deductible liabilities will be amended so that they are not taken into account twice.

  • R&D Tax Offset Trimmed – The rate for the refundable Research and Development (R&D) Tax Offset will be reduced by 5% from 1st July, 2014. Even after this reduction, a generous 40% refundable offset will still be available for qualifying R&D expenditure that you incur.
  • FBT Rate Increased – To align with the new Medicare Levy-inclusive top marginal tax rate, the FBT rate will increase to 49% from 1st April, 2015, until 31st March, 2017 (up from the current 47%). This may make it less attractive to provide non-cash benefits to your employees.

 

MISCELLANEOUS

  • Higher Petrol Prices – The indexation of fuel excise will be re-introduced from 1st August, 2014. This is forecast to increase petrol prices by 1 cent per litre each year.
  • Public Sector Job Cuts – 16 500 Federal public sector jobs will be cut by July, 2017, including more than 7000 in the coming financial year. The Tax Office will be among the hardest hit with more than 2300 full-time jobs expected to be shed in 2014/2015 alone.

 

(As Published by The Australian Taxation Reporter team, 14th May, 2014)

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