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Date of article: 16 May 2014
Last updated: 2 June 2014

Federal Budget 2014-15

The Treasurer, Mr Hockey, delivered his first Federal Budget on 13 May 2014. The 2014-15 Federal Budget contained few tax and superannuation measures, but includes a range of expenditure savings measures relating to middle-income benefits, social security and health.

While there is a range of savings measures in the Budget, there is also new spending. Overall, the fiscal policy is not expected to affect economic growth.

  • A 2% Temporary Budget Repair Levy (3 years) for individuals' taxable incomes above $180,000, starting 1 July 2014.
  • Reform to Family Tax Benefit (FTB) Part A and Part B.
  • Abolishing of various offsets, including dependent spouse tax offset, mature age worker tax offset.
  • New subsidy for employers hiring job-seeker age 50 or older.
  • Changes to Higher Education Loan Programme repayment threshold and indexation.
  • Introduction of patient co-payment to the Medicare system.
  • Superannuation Guarantee rate to increase to 9.5% on 1 July 2014.
  • Option to withdraw excess non-concessional superannuation funds.
  • Increasing the qualifying age for the Age Pension to 70, and changes to deeming rules for income test.

 

Superannuation measures

Superannuation Guarantee rate

The timing of the increase of Superannuation Guarantee (SG) rate will be delayed. After the increase from 9.25% to 9.5% from 1 July 2014, the SG rate will remain at 9.5% until 30 June 2018. Thereafter, increasing 0.5% each year until it reaches 12% in 2022-23.

Option to withdrawal excess non-concessional contributions

The Government will allow individuals the option to withdraw superannuation contributions exceeding the non-concessional cap, instead of being subject to excess contributions tax. This will apply to excess non-concessional contributions made after 1 July 2013.

This new measure will seek to address the inadvertent breaches of superannuation contributions caps that result in disproportionate tax penalty.

The final details are yet to be worked out.

Individuals who leave their excess contributions in the fund will continue to be taxed on these contributions at the top marginal rate.

 

Personal income tax

Temporary budget repair levy

A three year temporary levy will be imposed on high income individuals from 1 July 2014 until 30 June 2017. The levy will be 2% on individuals’ taxable income above $180,000.

For example, an individual with taxable income of $200,000 will pay 2% on $20,000, a $400 of levy.

Personal income tax rate

The personal income tax rates and thresholds for the 2014-15 income yearare as follows (rates do not include Medicare levy, rising to 2% from 1 July 2014):

 

Taxable income 2014-15 Marginal tax rate % 2013-14 Marginal tax rate %
0 – 18,200 Nil Nil
18,201 – 37,000 19% 19%
37,001 – 80,000 32.5% 32.5%
80,001 – 18,000 37% 37%
180,000 + 47%* 45%

* includes 2% Temporary Budget Repaid Levy.

With Medicare levy included, the top marginal tax rate would be 49%.

 

Families

Family tax benefits

Payment rates temporary freeze - The Government will freeze the current Family Tax Benefit (FTB) payment rates for 2 years from 1 July 2014.

Some of the eligibility thresholds (lower income free area) will not be indexed for 3 years from 1 July 2014.

FTB Part B – The primary earner income limit will be reduced from $150,000 to $100,000. It will also be limited to families whose youngest child is younger than 6 years of age (with transitional arrangement for families already receiving FTB Part B). These new eligibility criteria will commence 1 July 2015.

FTB Part A – From 1 July 2015, a per-child add-on amount will no longer be used to calculate a family’s higher income-free area for FTB Part A.

 

Age pension/ Senior Australians

Age Pension age to increase to 70

The Budget confirmed that the eligibility age for Age Pension will increase to age 70 by 2035:


Date of birth Eligible at age Commencing from
Born on or before 30 June 1952 65  
1 July 1952 - 31 Dec 1953 65.5 1 July 2017
1 Jan 1954 - 30 June 1955 66 1 July 2019
1 July 1955 - 31 Dec 1956 66.5 1 July 2021
1 January 1957 - 30 June 1958 67 1 July 2023
1 July 1958 - 31 December 1959 67.5 1 July 2023
1 January 1960 - 30 June 1961 68 1 July 2027
1 July 1961 - 31 December 1962 68.5 1 July 2029
1 January 1963 - 30 June 1964 69 1 July 2031
1 July 1964 - 31 December 1965 69.5 1 July 2033
1 January 1966 and later 70 1 July 2035

Mature age worker tax offset to be abolished

The mature age worker tax offset will be abolished from 1 July 2014. It will be replaced by a direct payment of up to $10,000 to employers who employ a job seeker age 50 years or over, who has been receiving income support for at least six months.

Seniors Health Card

From 1 January 2015, non-taxable superannuation income will be included in the income test for Commonwealth Seniors Health Card (CSHC) income test. It will be based on the deeming rates rather than then actual pension drawn from superannuation account (similar to deeming rates for Age Pension income test commencing 1 January 2015).

This will make the CSHC harder to qualify for.

This measure is subject to a grandfathering provision. The changes will not affect existing CSHC holders who have existing superannuation account based income streams. However, any new superannuation account based income streams purchased after 1 January 2015 will be subject to the new rules.

Currently, to qualify for a CSHC a person must have adjusted taxable income below the relevant annual income thresholds. These are $50,000 for singles, $80,000 for couples, combined, or $100,000 for a couple separated by respite care, illness.

 

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