Sunday, 18 May 2014

Bantacs.com.au 2014 Budget Summary

Bantacs.com.au 2014 Budget Summary
I remember something in the press about the LNP doubling the deficit to suite their sky is falling agenda, “new ways of measuring things” Anyway I find that interesting considering they are claiming the budget as a success because it will take the deficit from $49.9Bil to $29.8bil. 

Does this mean that by the old measurement rules they have actually increased the deficit?
Deficit Levy
A three year temporary levy of 2% will be imposed on individuals’ taxable income in excess of $180,000 pa, from 1 July 2014 until 30 June 2017. Note that is only 2% on the amount over $180,000.. 

Strategy
this means high income earners should delay expenses this year and pull forward income if they can, though for 2%, it might not be worth their effort, definitely not worth running around trying to get tax deductions before 30th June.

Other laws that are based on the maximum tax rate will take the levy into account but with the FBT rate it will not consider whether the person receiving the benefit is on $180,000 or $20,000 this rate will increase to 49% regardless so it is even more important than ever to make sure you cancel out the FBT by making employee contributions even if you have to give the employee a pay rise to cover it.

Help & Hecs Debts From 1st July 2016 these loans will start to be repaid once income exceeds $50,638 but only at a rate of 2%. The standard 4% will apply to income above $56,264. The big incentive to repay as soon as possible is that instead of increasing the balance owing by just CPI it will now be the bond rate which could be up to 6% so generally it would be better to repay your debt than keep money in a savings account, which has not been the case in the past.

Youth Allowance
From 1st January 2015 Parents will have to support their children until they are 24 previously it was 22.
Current recipients will continue to qualify but the income thresholds will be frozen for 3 years.
Family Payments

From 1st July, 2015 families where the primary income earner earns more than $100,000 will no longer qualify for part B payment. 
Further, Part B payments will be limited to families whose youngest child is younger than six years of age. A transitional arrangement will ensure families with a youngest child aged six and over on 30 June 2015 remain eligible for the payments for two years. 
For sole parents where their youngest child is between 6 and 12 years, they will receive just $750 a year (a reduction of $2,268.55 a year.


Pension eligibility age by date of birth:
BAN TACS Accountants Pty Ltd Newsflash
for sole parents and a reduction of $3,018.55 a year for two parent families) instead of the Part B but only if they qualify for the maximum payment of Part A, nothing for two parent families. Previously sole parent families would have received Part B regardless of income.

Part A and Part B amounts paid will be frozen for the next 2 years. The income thresholds will be
frozen for 3 years except of course the reduction of the income test for the primary income earner in a
family, from $100,000 to $150,000 for Part B, the payment that helps support a parent to stay home with their children. A boom for the child care industry, oh hang on a minute that is under supplied anyway and receiving much more in subsidies per child than Part B? Did they factor after school care into the budget forecasts?
Further, the income threshold for Part A will effectively be reduced from 1st July, 2015 because there will be no allowance for the number of children in the family. The large family allowance has been reduce to only be payable for the fourth and subsequent children from 1st July, 2015. All a little slight of hand, that is going to affect the most in need more than most taxpayers

From 1st July, 2015 the end of year supplements will be reduced to $600 for each Part A child and $300 for each family that is entitled receive Part B (now only children under 6 or sole parents with a child under 12)
Workers over 50
From 1 July 2014, a payment of up to $10,000 will be available to employers who hire a mature aged job seeker, aged 50 years or over who has been receiving income support for at least six months.
Pension Age
A jump straight from 65 to 70 for the age pension by 1st July 2035.
The following table sets out the Age
Date of birth between
Age at which eligible for Age Pension
1 July 1952 and 31 December 1953
651⁄2
1 January 1954 and 30 June 1955
66
1 July 1955 and 31 December 1956
661⁄2
1 January 1957 and 30 June 1958
67
1 July 1958 and 31 December 1959
671⁄2
1 January 1960 and 30 June 1961
68
1 July 1961 and 31 December 1962
681⁄2
1 January 1963 and 30 June 1964
69
1 July 1964 and 31 December 1965
691⁄2
1 January 1966 and later
70
Pensions
The government will change how it deems the investment return from a person's financial assets for the purposes of the pension income test. The deeming thresholds will be reset from $46,600 to $30,000 for single pensioners and from $77,400 to $50,000 for pensioner couples from 1 September 2017. 
That is you will be expected to earn a higher rate of return on income above these amounts regardless of whether you do or not. 
These thresholds will not increase for 3 years.

From 1 September 2017, pension increases will be linked only to the Consumer Price Index (CPI) not
average earnings Payments of the Senior Supplement will also cease after the June 2014 payment. 

This was worth $876.20 per year for singles and $660.40 for each member of a couple.
The pensioner education supplement will be abolished from 1st January, 2015.

Medicare System
The Medicare levy surcharge income threshold and private health insurance rebate income threshold
will be frozen for 3 years from 1st July, 2015
From 1st July, 2015 despite the medical profession coming to the party and bulk billing in many cases so there is no patient cost even though the Medicare payment did not keeping pace with fee increases. The government still has to flog this horse even harder. 

I wonder did they factor into the forecasts the social security payments saved by people dying due to a bad choice between food and a doctor’s visit. Yes on $36 per day that is the choice. 

The charge will be $5 to $7 on any doctor’s visit and on any out of hospital tests that the doctor recommends. The concession for these people on the poverty line is that after they have paid for 10 of these in a year they do not have to pay any more.
Further the restriction on hospitals preventing them charging for emergency room services, will be
removed.

NRAS

Funding for new projects will stop but currently tenanted properties and those under construction that
meet deadlines will continue to receive all the incentives.

Superannuation
The superannuation guarantee rate will now increase to 9.5% on 1 July 2014 and remain at 9.5% until 30 June 2018. The rate will then increase by half a percent each year until it reaches 12% in 2022/23.
Small Business Depreciation Rates

The budget was silent on the Abbott government proposal, from 1st January, 2014 to remove the $5,000 outright deduction on motor vehicles (then 15% depreciation on the balance) and the immediate write off of equipment purchases under $6,500 (includes motor vehicles) created by the previous Labour government.

The repeal legislation did not get through the senate but the government has not given up on the proposal as it is part of removing the mining tax. This means that the law could be changed retrospectively in July, 2014; leaving business with no idea how to complete their tax returns let alone any chance of the incentive actually creating the increased spending by business that it was intended to generate. 

All that will happen is businesses that would have spent the money anyway will be the only ones to benefit from the incentive if it is not clawed back, completely missing the point.

More Uncertainty:
Other issues left in limbo because he budget paper was silent on them yet the government is not backing down on trying to get them through the senate. Many of which need answers before 30th June
The company loss-carry back provisions 
The repeal the low income superannuation contribution the contribution would be not payable in
respect of concessional contributions made after 1 July 2013; so what do low income earners do at
30th June this year?
repeal the income support bonus;
repeal the schoolkids bonus;
While the reduction in the company tax rate to 28.5% was mentioned by Joe Hockey it was not included in the budget calculation so is far for certain. 


Ask BAN TACS
For $69.95 at Ask BAN TACS you can have your questions regarding Capital Gains Tax, Rental Properties and Work Related Expenses answered by Julia. I will include ATO references to support our conclusion, answer are generally 300 to 700 words long depending on the complexity.
Disclaimer: Please note in many cases the legislation referred to above has only just passed through parliament. The full effect is not c lear yet but it is already necessary to make you aware of the ramifications despite the limited commentary available. On the other side of the coin by the time you read this information it may be out of date. The information is presented in summary form and intended only to draw your attention to issues you should further discuss with your accountant. Please do not act on this information without further consultation. We disclaim any responsibility for actions taken on the above without further advice as to your particular circumstances.