It comes as no surprise that we have a budget deficit of $19.4 billion, as a result of a lower resource tax, slower recovery in capital gains, the high dollar and a weaker corporate profit. Tax receipts have been revised down from the 2012-13 by over $60 billion in the four years to 2015-16, with the total write downs in tax receipts since the start of the global financial crisis totalling $170 billion over five years.
The government is planning to have the budget to balance in the 2015-16 and to a surplus by 2016-17.
The government has made a $9.8 billion commitment to increase school funding over six years and its goal of being in the top 5 education systems in the world by 2025. This was as result of the Gonski review which called for a fundamental overhaul of our school funding system.
The Government is spending $660 million for pre-school and the establishment of a $300 million Early Years Quality Fund.
The Government is reforming its National Disability Scheme by 2018-19. Around 460,000 Australians with significant and permanent disability will get the support they deserve. Under the plan, the government will provide $19.3 billion over seven years from 2012-13 to roll out Disability Care Australia across the country.
As expected in our Pre-Budget Brief, the Government will increase the Medicare levy from 1.5% to 2.00% to fund the scheme from 1 July 2014.
The Superannuation Guarantee rate will increase from its current 9% per annum to 9.25% per annum from 1 July 2013 and gradually increasing to 12% per annum by 1 July 2019.
The government will be lifting the cap from $25,000 concessional contributions to $35,000 for those aged 60 from 1 July 2013 and those aged 50 and over from 1 July 2014.
The government will also abolish the maximum age limit on the SG from 1 July 2013 enabling workers aged 70 and over to receive the SG for the first time.
From 1 July 2012, the Low Income Superannuation Contribution allows most people with income up to $37,000 to effectively pay no tax on their super contributions by providing a tax cut of up to $500 a year.
The Government will be targeting the tax exemption for earnings on superannuation assets supporting retirement income streams. From 1 July 2014 future earnings from these streams will be tax free up to $100,000 in earnings, any income over this threshold will be taxed at 15%.
Australia’s migration program will be maintained at 190,000 places in 2013-14 to help fill skills shortage and reunite Australian Families. The program provides 128,550 places for skilled migrants, 60,585 places for family migration and 565 places for migration under special eligibility.
The Government will continue its commitment to provide refuge for the world’s most vulnerable people by accepting 20,000 people through the humanitarian program in 2013-14.
457 Visa – The government will increase the application fee to $900 from 1 July 2013
University Funding Cuts
The Government will apply an efficiency dividend of 2.0% in 2014 and 1.25% in 2015 to all grants provided under the Higher Education Support Act 2003 (HESA), with exception of grants under the Australian postgraduate Awards and Superannuation payments to universities. This is estimated to save $902.7 million over four years.
The Government has signed a tax information exchange agreement with Uruguay on 10 December 2012 - Australia now has 34 signed tax information exchange agreements.
The Government will also be looking to close loopholes used by multinationals. The disproportionate allocation of debt to Australia by the tightening and improving of the thin capitalisation rules, including changing all safe harbour limits and extending worldwide gearing test to inbound investors. Increasing the minimum threshold from $250,000 to $2 million of debt deductions, which will reduce compliance costs for small business.
The Government will be providing $77.8 million to the Australian Tax Office over four years to improve compliance and provide a legal playing field by expanding the data matching to third parties.
R & D Tax Incentive
No new measures have been announced other than the credits of up to 45% will now be refundable in quarterly instalments from 1 January 2014. They are limited to companies with annual aggregated turnover less than $20 billion.
Seniors Home Downsizing Trial
The Government, in an initiative to help Senior Australians, is commencing a trial from 1 July 2014. The trial is to help senior Australians that want to downsize their home without being “punished” by way of having their pensions reduced based on the excess sale proceeds from their home.
The basis of the trial is that eligible pensioners, living in the one home for more than 25 years, can put a maximum of 80% of the proceeds (capping at $200,000 plus interest earned) into a special account that won’t affect their pensions. It will then not be counted within income & assets tests for 10 years, or until a withdrawal is made.
Pension Bonus Scheme Changes
The Pension Bonus Scheme introduced in 2009 will end. It was found to not encourage older workers to continue working beyond pension age, with the general consensus saying they would have continued to work anyway. If you were eligible to register, but have not done so, you still can register until 1 March 2014.
Given the findings from a review on the Pension Bonus, the Work Bonus has now been introduced. This allows older Australian’s to keep working, and earn up to $250 per fortnight, without it affecting their pension income. Unused earning amounts can also be rolled forward.
Family Payment Changes
From 1 March 2014, the Baby Bonus will be abolished. In its place is a new loading payment for those receiving Family Tax Benefit Part A (on the provision that you are not receiving Paid Parental Leave). Payments are $2,000 for the 1st child & $1,000 for each child thereafter. It will be paid with a one off first instalment of $500, and the remainder combined in the fortnightly payments received thereafter over a 3 month period.
Other Family Benefit Changes
The higher income limits previously put in place in relation to various family assistance payments will remain until at least 30 June 2017.
For families that claim their Family Tax Benefit Entitlement yearly, will now only have 1 year to make a claim, as opposed to the previous 2 years (meaning, for the current tax year, the last possible date to make a claim will be 30 June 2014).
Family Tax Benefit Part A, from 1 January 2014, will only be paid until the end of the calendar year in which the teenager of the family finished school (Year 12).
The previously predicted tax cuts due in the 2015-2016 year have now been pushed back. They are now estimated to be in the 2018-2019 tax year.
An annual cap of $2,000 will be introduced in reference to Self Education Expense deductions to help with the National Plan for School Improvement.
The Satellite Phone Subsidy Scheme will remain until 30 June 2014.
The Australian Broadcasting Corporation (ABC) and the Special Broadcasting Service Corporation (SBS) will receive an additional $109.4 million over 3 years.
National Broadband Network (NBN) initiatives, will receive an extra $12.9 million.
NBN Fibre construction is due to be complete by mid-2016.
Veteran Mental Health Care will receive an additional $26.4 million over 4 years, with new measures taking effect from July 2014. The Veteran Community is receiving overall funding of $12.5 billion, as well as $66.7 million for increased veteran support.
Medicare Levy exemptions & low income thresholds will continue to assist low income earners with the increase in the Medicare Levy. For the current tax year, the Medicare Low-Income Threshold for families will increase to $33,693.
The Net Medical Expenses Tax Offset will be phased out and will be removed entirely by 1 July 2019 (when the Disability Care Australia is fully operational).
The Mature Age Worker Tax Offset is continuing to be phased out, and is now only applicable to those born on or before 1 July 1957. Also continuing to be phased out is the Dependant Spouse Tax Offset.
From 1 January 2014, the voluntary repayment discounts for HELP/HECS debts will be removed. Up until this date, the 10% up-front student contribution discount, and the 5% voluntary payment bonus with the ATO will remain.
It remains to be seen how these measures will “measure up”.
For more information on Marcos Accountants services please go to Marcos Taxation and Accounting