Wednesday, 15 May 2013

The Simplified 2013 Federal Budget Report by Matt O'Connor

2013 Federal Budget Report

A great friend of the family Matt has done this summary for us on The 2013 Federal Budget.
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15 May 2013

2013 Federal Budget Report

On the 14th May 2012, the Treasurer Mr Wayne Swan handed down the 2013/14 Federal Budget and I have detailed various parts of it for your perusal.

Economic Outlook

The treasurer said with the strong Australian dollar, the total write down in revenue since the GFC was around $170bn. The Treasurer commented that this budget is about jobs and growth and this is why a $19bn deficit has been estimated bringing the budget back into surplus in 2015/16.

With the write down of $17bn in revenue in the 2012-13 year, Australia remains among eight countries in the world to preserve its AAA credit rating despite the revenue losses and economy pressures imposed from a high Australian dollar.

Superannuation reforms

The Government has confirmed its intention to implement the following superannuation reforms:
·         Taxing earnings in pension phase that exceed $100,000 pa at 15%. 
·         Special arrangements will apply when assessing capital gains on assets purchased by a fund before 1 July 2014:
o   Presently, where a capital gain is made in a superannuation fund, whilst in pension phase, is tax free
o   For assets purchased before 5 April 2013, a full exemption will continue to apply to capital gains that accrue before 1 July 2024
o   For assets purchased from 5 April 2013 to 30 June 2014, individuals will have the choice of including in the $100,000 limit the capital gain, or only that part that accrues after 1 July 2014; and
o   For assets purchased from 1 July 2014, the capital gain will be included in the $100,000 limit.
·         Recognising deferred annuities for earnings tax concession purposes
·         Increasing the concessional contributions cap to $35,000 from:
o   1 July 2013 for those aged 60 and over
o   1 July 2014 for those aged 50 and over
·         Increasing the ability to refund excess concessional contributions and allowing excess concessional contributions to be taxed at an individual’s marginal tax rate
·         Deeming account based pensions under the social security income test
·         Increasing the balance threshold below which certain lost super must be transferred to the ATO
·         Establishing a Council of Superannuation Custodians
·         Additional 15% tax on concessional contributions for high income earners as follows:
o   Individuals who exceed the combined $300,000 annual threshold will generally have to pay an additional 15% tax on their concessional contributions
o   If an individual’s income before concessional contributions is less than $300,000 but the inclusion of concessional contributions pushes them over, then only that part of the excess over $300,000 threshold will be subject to the additional tax.


·         The personal income tax cuts which involved increasing the tax free threshold to $19,400 scheduled to commence on 1 July 2015, is deferred.
·         The Medicare levy will increase by 0.5% from 1.5 to 2.0 per cent from 1 July 2014 to provide funding for Disability Care Australia.
·         The Medicare levy low-income threshold for families will increase to $33,693 for the 2012/13 income year, with effect from 1 July 2012. The additional amount of threshold for each dependent child or student will increase to $3,094.
·         The net medical expenses tax offset will phase out from 1 July 2013
·         Work related self-education expense deductions are to be restricted through an annual $2,000 cap on expenses from 1 July 2014
·         Current marginal tax rates remain as follows:
Tax on this income
0 - $18,200
$18,201 - $37,000
19c for each $1 over $18,200
$37,001 - $80,000
$3,572 plus 32.5c for each $1 over $37,000
$80,001 - $180,000
$17,547 plus 37c for each $1 over $80,000
$180,001 and over
$54,547 plus 45c for each $1 over $180,000

Social Security
·         The Government proposes to increase the free income area for eligible income support recipients from the current rate of $62 per fortnight to $100 per fortnight from 20 March 2014.  The payments affected by this proposal are:
o   Newstart allowance
o   Sickness allowance
o   Parenting Payment (Partnered)
o   Widow Allowance
o   Partner Allowance Benefit
o   Partner Allowance Pension
·         The Pension Bonus Scheme closed for most new entrants as of 20 September 2009.  However, eligible individuals who were over pension age as of 20 September 2009 are still able to apply for Centrelink’s discretion for late registration.  From 1 March 2014, the Government will cease to accept late registrations.
·         The Government proposes to exempt proceeds from downsizing the family home:
o   Currently, the family home is not assessed if the dwelling and adjacent land is less than 2 hectares
o   The Government proposes a pilot plan which will offer a means test exemption for Age Pensioners who are downsizing the home.  To qualify:
§  The family home must have been owned for at least 25 years; and
§  At least 80% of the proceeds from the sale (up to $200,000) must be deposited into a special account by an authorised deposit taking institution.
o   These funds (plus interest) will be exempt from pension means testing for up to 10 years provided there are no withdrawals during the life of the account
o   The pilot plan will commence on 1 July 2014 and be closed for new customers from 1 July 2017

·         The Baby Bonus will be replaced from 1 March 2014 as follows:
o   The Government will increase the Family Tax Benefit (FTB) Part A by $2,000 for the first child and $1,000 for subsequent children
·         The Government will freeze the indexation of eligibility thresholds and amounts for certain family based payments at their current levels until 1 July 2017. This will mean:
o   $150,000 for the Paid Parental Leave Scheme, FTB Part B, certain dependency tax offsets, Dad & Partner Pay, and
o   The FTB Part A upper income limit will remain at $94,316, plus an additional $3,796 for each child after the first.
·         From 1 January 2014, FTB Part A will only be paid until the end of the calendar year a child completes school
·         The Child Care Rebate which provides a 50% rebate on out of pocket eligible child care expenses, up to a maximum of $7,500 per child per year, will pause for indexation.

Please feel free to contact our office if you require any further information in relation to the above.

Yours sincerely
Matt O'Connor