Brought to you from Derek Fitzgerald
Partner and Financial Planner
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The Coalition Government has released their first Federal Budget.
After much speculation in the media, overall the budget will have pretty minor impacts on the majority of our clients. The biggest relief was that the promise to not tinker with superannuation was largely kept.
However, there are a few items to note:
The rate at which the superannuation guarantee will increase to 12% has once again been slowed. From 1 July 14, the rate will move to 9.5% (from 9.25%) and will now stay paused at this level until 1 July 2018. The SG rate will reach 12% in 2022, up from the original date of 2019.
Comment: This underlines the importance of continuing to make additional contributions to super from your own income.
Whilst not a budget measure, the concessional contribution caps for people aged below 50 will move to $30,000 (from $25,000) from July 2014. People aged over 50 (or turning 50 in 14/15) will be able to contribute $35,000.
The non-concessional (or after tax) limit will move from $150,000 to $180,000 from 1 July 2014.
Comment: You may have additional scope to increase your superannuation contributions next financial year. We will be reviewing your situation over the coming months and will advise you individually in due course.
For the 2014, 2015, and 2016 Financial year, individual taxpayers with taxable income of greater than $180,000 will pay an additional 2% in taxation.
Comment: This is what the media has latched on to as the broken promise; additional tax. Care will need to be taken for individuals who earn this sort of money through once off events - e.g. selling a property or taking money from superannuation before age 60.
The pension age is currently in the process of being moved from 65 to 67. The Government wants to move the pension age further up to 70 by the year 2035. It will be a gradual process commencing in 2025.
Comment: It is with great relief that those either in the system or close to reaching pension age have been left largely unaffected by the recent budget. However, those currently under the age of 50 will feel the impact. Again, the importance of adding extra money to super now will help to alleviate the impact of this change.
The main focus is on additional assessment and job seeking activities for existing and new entrants to the Disability pension (DSP) who are aged under 35.
Comment: Those of you in receipt of the DSP and are close to your aged pension age, will not be affected by this change.
This is a concession card for self-funded retirees. Currently, superannuation income streams do not count as income towards determining eligibility. However, new income streams commenced from 01/01/2015 will be counted for existing and new card holders.
Comment: If you currently have a Commonwealth Seniors Health Care card, your eligibility will remain, provided no new superannuation income streams are commenced that take you over the annual $50,000 (single) or $80,000 (couple mark).
Note that those of you in receipt of Centrelink benefits and the corresponding Health Care Card will be unaffected by this change.
Both the dependant tax offset and Mature Age Worker Tax Offset will be terminated effective 01/07/2014.
Comment: Both of these rebates are currently in the process of a "soft phase out". This new measure is a "hard and fast" complete cut off.
At this stage, the paid parental leave scheme is schedule to commence on 01/07/2015. Women may be able to receive 26 weeks leave based on their pre-maternity salary, but capped at $100,000. That is the maximum payout will be $50,000 over 26 weeks for employment income of $100,000 per annum or greater
Comment: Based on media speculation (generally not 100% representative of the truth!), there are elements in the Government seeking to water down this scheme. There will be another budget before its implementation, so too early to call.
The threshold at which eligibility for Family Tax benefit part B ends will reduce form $150,000 per annum to $100,000.
Comment: This change will impact on a lot of people with young families. A family with a non-working spouse and partner on $120,000 doesn't really have much left after tax, mortgages and the like.
We will be reviewing individual situations to see if any significant changes need to take place. Overall, the budget wasn't as scary as first thought!
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LRS® Life Risk Specialist
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