The Federal Treasurer, Wayne Swan described his sixth Federal Budget as a ‘sensible, calm and responsible approach that puts jobs first’. This Budget could be described as uneventful as it contained little in the way of sweeteners for middle income earners, families and pensioners.Budget 2013

Many of the key announcements were released pre-budget and confirmed by the Government in the budget papers. These include a number of changes to the superannuation system such as an increase in the concessional contributions cap for older Australians, changes to the excess contributions tax regime and 15% tax on certain earnings in the pension phase.

The Budget also contained some announcements which were unexpected including the phase out of the net medical expense, the removal of the baby-bonus, and a new housing help pilot scheme allowing pensioners to downsize the family home without affecting their pension.

Before any of these announcements can be implemented, they will require passage of legislation.

Below is a summary of the proposed changes. Should you require a more detailed summary please contact my office on 07 3118 6000.

Superannuation 

  • Reduction of tax concession for superannuation contributions of high income earners 
    • affects people with earnings over $300,000
  • Low-income superannuation contribution
    • individuals earnings under $37,000 may be entitled to an extra $10 to $20 contribution
  • Tax exemption for earnings on income stream assets
    • From 1 July 2014 (subject to some grandfathering), the tax exemption for earnings on income stream assets will be restricted to $100,000 per annum per individual. If an individual’s pension earnings exceed $100,000, excess income will be taxed at 15 per cent. The $100,000 threshold will be indexed to CPI annually in increments of $10,000.
  • Higher concessional contributions cap for older persons
    • The concessional contributions cap will be increased from the current $25,000 per annum to $35,000 per annum (unindexed) for those aged 60 or more from 1 July 2013, and for those aged 50 or more from 1 July 2014.
  • Excess concessional contributions tax changes from 1 July 2013
    • Excess concessional contributions will be taxed at the individual’s marginal tax rate, rather than the current excess concessional contributions tax rate of 46.5 per cent (including a 15 per cent contributions tax).

 Taxation 

  • Personal income tax rate reduction deferred to 2015/16
  • Medicare levy low-income threshold and increase in the Medicare levy
    • Medicare Levy will be increased from 1.5% to 2% from 1 July 2014
  • Net medical expenses tax offset phase out
    • The tax offset will continue to be available for taxpayers for out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019.
  • Work related self-education expenses
    • The Government will better target work related self-education expense deductions through an annual $2,000 cap on these expenses from 1 July 2014.
  • Preventing ‘dividend washing’ for sophisticated investors
    • The Government will aim to close a loophole that enables sophisticated investors to engage in ‘dividend washing’ from 1 July 2013.
  • Farm Finance package

 Centrelink/ Department of Veterans’ Affairs / Families 

  • Account-based pensions and the Centrelink income test
    • This will only apply to new account-based pensions commencing after 1 January 2015 and all existing account-based pensions will be grandfathered indefinitely or unless commuted and rolled into a new income stream after 1 January 2015.
  • Higher income-free limit for allowances
    • The income-free limit will be increased from $62 per fortnight to $100 per fortnight from 20 March 2014 before an individual’s income support will start to reduce.         
  • Removal of the scheduled increase in Family Tax Benefits
  • Abolishing the Baby Bonus – new family payment arrangements for newborns
    • New family payment arrangements will replace the Baby Bonus from 1 March 2014 after which the Baby Bonus will no longer be available.
  • Helping senior Australians downsize the family home – pilot
    • This is a trial but seems to be more of a deferral of means testing
  • Staying at home – improvements          
  • HECS-HELP Discount and Voluntary HELP Repayment Bonus — ending discounting

More About -- > 

Thomas Jacks BCom (Acc), SMSF SpecialistTM, Adv. Dip F.S. (FP)
“I want to be able to assist clients with their investment and retirement planning by providing real strategy advice. It’s my aim to not only help my clients but to educate them by addressing the entire picture” Google Plus

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