How will the 2015 Federal Budget affect you?
Last week’s federal budget announcement has been assessed as unfair by some and with many measures still blocked in the Senate, it means it is nuanced with good and bad news spread more widely. For example, there are greater benefits for working families, but some pensioners are likely to see reduced incomes.
Despite this, it is important to note the Budget is still only proposed at this stage and that, to be legislated under the new Senate, the Government will need the support of the crossbench in the Senate.
Here are some key Budget changes that could affect you and your family:
Superannuation
After much speculation in the lead-up to the Budget, there are no significant changes to superannuation. The Government reiterated its commitment to not make any adverse superannuation changes in this term of office.
Taxation
Personal Income Tax Rates
There will be no change to the personal income tax rates for the 2015/16 financial year.
Medicare Levy
The Medicare levy low income threshold will be increased for the 2014/15 financial year as outlined below:
- $20,896 for singles
- $35,261 for couples plus $3,238 for each dependent child
- $33,044 for single seniors and pensioners
Therefore if your taxable income is below this threshold you are not liable for the Medicare levy.
Age Care
New aged care residents who enter aged care from
1 January 2016 will have their rental income from renting out their former home included in the calculation of their means tested amount.
Centrelink and Pensions
Centrelink– Asset Test Changes
From 1 January 2017, the Government will increase the Centrelink lower asset test thresholds and reduce the upper thresholds. In addition, the asset test taper rate (the amount by which a person’s pension entitlement decreases under the assets test) is proposed to increase from $1.50 per fortnight to $3 per fortnight per $1,000 of assets over the lower threshold.
The following table outlines the current and proposed asset test thresholds:
|
Current Lower Threshold |
Proposed Lower Threshold |
Current Cut-off limit |
Proposed Cut-off limit |
|
|
Single Homeowner |
$202,000 |
$250,000 |
$755,500 |
$547,000 |
|
Single Non-Homeowner |
$348,500 |
$450,000 |
$922,000 |
$747,000 |
|
Couple Homeowner |
$286,500 |
$375,000 |
$1,151,500 |
$823,000 |
|
Couple Non-Homeowner |
$433,000 |
$575,000 |
$1,298,000 |
$1,023,000 |
Health Care and Seniors Cards retained
All people affected by the scaling back of the maximum asset threshold will automatically be issued with a Commonwealth Seniors Health Card (CSHC) or Health Care Card (for those under pension age).
The chart below assumes a single homeowner has financial investments subject to deeming at the current rates. It illustrates the rate of fortnightly pension payable at various levels of financial investments under the income test, current asset test and proposed asset test.
Fortnightly pension calculation
Colonial First State Federal Budget Briefing 2015
Defined Benefit Schemes – Change to Income Test
From 1 January 2016, the amount of defined benefit superannuation income that can be excluded from the Centrelink income test will be capped at 10% of the total pension amount.
Recipients of Veteran’s Affairs pensions and/or defined benefits income streams paid by military superannuation funds are exempt from this measure.
Childcare and Families
A new Childcare Subsidy (CCS) - Introducing an Activity Test
Effective from 1 July 2017, the Government will abolish the existing Child Care Benefit and Child Care Rebate and introduce a new Child Care Subsidy (CCS), paying between 85% and 50% of parents’ childcare fees, based on their income.
The focus here is on getting more low and middle-income parents to work, with boosted payments for most families. It is estimated that the average benefit will be about $30 for families earning between $65,710 and $170,710. There is also a $250m trial for those earning under $250,000 to hire a nanny.
Small Business
Small Business to pay less tax
Small business (defined by the ATO as those with a turnover of less than $2m) will receive a 1.5% tax cut from 1 July 2015, taking their tax rate to 28.5%.
The 94% of small businesses that are not subject to the company tax rate, such as sole traders and partnerships, will get a 5% tax discount capped at $1,000 a year, from
1 July 2015.
Accelerated Depreciation
Small business owners are now able to claim a deduction for an unlimited number of assets worth up to $20,000, until the end of June 2017.
Measures to encourage business start-ups
In a positive change for new start-ups, employees who are issued shares or options under an Employee Share Scheme will “generally not be liable” to pay up-front tax on those shares or options.
To determine how the Budget announcements can maximise your current financial position, book a FREE financial health check to revisit your financial goals and get back in the driver’s seat today.
General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.