On Tuesday 13 May 2014 Joe Hockey and the Liberal party released their first budget in power. As expected the Liberals started on their pursuit of reducing the deficit created by the Labor party. Their plan is to reduce the deficit to $2.8billion by 2017/18 compared to the current $49.9billion. Although there was the introduction of a new temporary budget repair levy for high income earners, a majority of the budget changes affect those on welfare and lower incomes. As the Treasurer stated numerous times throughout his speech – “the days of borrow and spend must end” (very poetic by Joe) and “the age of entitlement is over – we need to move to an age of opportunity”.
Some of the big tickets items in the budget include a new $20billion Medical Research Future Fund, abolition of the carbon and mining tax, deregulate the higher education system, reduction in foreign aid budget and number of public servants as well as a freeze on Government salaries. The other big ticket item was the reduction of monies available to the States for schools and hospitals. Many see this as a catalyst for the States and Territories to argue an increase in the GST rate.
The shadow Treasurer in his response to the budget very quickly pointed out the Liberals broken promise of no new taxes and stated that they will not be supporting medicare changes, pension and welfare changes and petrol tax changes, just to name a few. As a result of the Labor and the Greens holding power in the senate, the Liberals could face an uphill battle in getting any of this budget through parliament and legislated.
Below are the headlines for each budget area:
- Reduction of company tax rate from 30% down to 28.5% from 1 July 2015
- Introduction of paid parental scheme levy of 1.5% for large companies (where company >$5mill in taxable income)
- FBT rate to increase temporarily from 47% to 49% from 1 April 2015 until 31 March 2017
- Superannuation Guarantee rate to increase to 9.5% on 1 July 2014 and will move to 10% from 1 July 2018 and then gradually to 12% from 1 July 2022
- R & D tax incentives and tax offsets will reduce by 1.5% from 1 July 2014.
- Fuel excise indexation will be re-introduced biannually from 1 August 2014
- Employers may be entitled to a $10,000 wage subsidy when they employ a person who is aged 50+ and has been in receipt of Centrelink support for at least 6 months
- Introduction of new budget repair levy of 2% for those with taxable incomes above $180,000 from 1 July 2014 and ceasing on 1 July 2017
- From 1 July 2015 bulk billed visits to GP’s will cost an extra $7 per visit
- Increase in medicare levy low income threshold to $34,367 with an additional $3,156 for each additional child
- Freezing of indexation for private health insurance rebates from 1 July 2015 for 3 years
- Mature age workers tax offset and dependant spouse rebates will be abolished from 1 July 2014
- First home owners accounts will be closed from 1 July 2015
- From 1 July 2015 Family Tax Benefit Part B income limit will reduce from $150,000 to $100,000
- FTB Part B will also be limited to families whose youngest child is younger than 6 years from 1 July 2015
- Indexation on FTB payments will also be frozen for 2 years until 1 July 2016
- New FTB allowance from 1 July 2015 for single parents on FTB Part A where the youngest child is between 6 and 12 years
- Age pension age will increase from 65 years currently to the Labor legislated 67 years and then finally to 70 years by 1 July 2035 (this will affect those born between 1952 and 1966 +)
- From 20 Sept 2017 deeming thresholds will be reset down from $77,400 to $50,000 for couples and $46,600 to $30,000 for singles
- Indexation of pensions will be linked to the CPI only from 1 September 2017
- The age of eligibility for Newstart will increase from 22 to 24 years from 1 January 2015
- Compulsory participation requirements for Disability Support Pensioners under the age of 35 years will be introduced
- From 1 July 2015 those under 30 years must demonstrate appropriate job search for 6 months prior to receiving any payments
- From 1 July 2014 Commonwealth seniors health care card will be indexed with cpi
- From 1 January 2015 CSHCC eligibility will be assessed differently by requiring the addition of tax free pensions in the income test
- Taxpayers can elect to withdraw Excess non concessional contributions after 1 July 2013 to avoid the excess contributions tax of 93%
If you require any further information in relation this budget and its announcements please contact your principal or manager.