Australian Federal Government has proposed new federal budget for Financial Year 2014-2015, a key summary is shown below: Temporary Budget Repair Levy The government will introduce a three year Temporary Budget Repair Levy (the levy) on high income individuals from 1 July 2014 until 30 June 2017. The levy will apply at a rate of 2% on individuals’ taxable income in excess of $180,000 pa. A number of other tax rates that are currently referrable to the top personal tax rate will also be increased. This includes fringe benefits tax (FBT), certain withholding provisions and tax on excess superannuation contributions. With the exception of the FBT rate, these rates will be increased for the same period that the levy is in place. The FBT rate will be increased from 47% to 49% from 1 April 2015 until 31 March 2017 to align with the FBT income year. Impacts: − The differences in the timing of the FBT rate increase and removal (1 April 2015 to 31 March 2017) relative to the imposition and removal of the levy (1 July 2014 to 30 June 2017) may offer a short term opportunity for beneficial salary packaging. − The introduction of the levy will increase the attractiveness of concessional taxed products (including additional superannuation contributions within concessional caps, income protection products, and mortgage interest offsets arrangements). − Further, when coupled with the reduction in the company tax rate (refer below), the attractiveness of certain products which leverage differences between individual and corporate tax rates (such as insurance bonds) will increase. 2. Company Tax Rate Cut The Government has confirmed that it remains committed to cutting the company tax rate by 1.5% (to 28.5%) from 1 July 2015. However, this may effectively be countered by a 1.5% levy for large businesses to fund the Government’s proposed Paid Parental Leave Scheme. Impacts: − Potential impact on ability to frank dividends (as the parental leave levy may not count as a frankable tax). Federal Budget Summary 2014/15 Page 2 of 3 3. Age Pension and Superannuation Related Changes A number of age pension and superannuation changes were announced: • The Age Pension qualifying age will continue to increase by six months every two years, such that it will reach a qualifying age of 70 by 1 July 2035. This measure will not affect those born before 1 July 1958. • The indexation of income and assets tests for the age pension will be paused for three years from 1 July 2017. From 1 September 2017, age pension increases will be linked only to the Consumer Price Index (CPI). • Penalties for the breach of excess contributions caps for non-concessional contributions will be reformed to allow individuals to withdraw the amount of the excess contribution and associated earnings. • The schedule for increasing the Superannuation Guarantee Contribution (SGC) rate to 12% is changing. Instead of pausing the rate at 9.25% as previously announced, the SGC rate will increase to 9.5% on 1 July 2014. The rate will remain at this level until 30 June 2018. The rate will then increase by 0.5% each year until it reaches 12% in 2022/2023. Impacts: − Whilst reform of the excess contribution cap penalties is very welcome, the actual calculation of the “associated earnings” has been an obstacle in the past and is subject to consultation. − The superannuation system is being considered by the Financial Systems Inquiry and will also be considered by the Tax White Paper process. 4. Medical Research Future Fund A Medical Research Future Fund (MRFF) will be established on 1 January 2015. The MRFF will have a target capital level of $20bn. The MRFF will be managed by the Future Fund Board of Guardians, in accordance with an investment mandate issued by the Treasurer and Minister for Finance. Earnings on the MRFF capital will be available for medical research, while the capital will be preserved in perpetuity. 5. Infrastructure – Asset Recycling As previously announced, the Government will establish an Asset Recycling Initiative. This initiative will provide state and territory governments with incentive payments of 15% of the sale price of infrastructure asset sales where proceeds are reinvested in new productivity-enhancing economic infrastructure. This initiative has been capped at $5bn over the next five years. Federal Budget Summary 2014/15 Page 3 of 3 6. First Home Saver Accounts Scheme The First Home Saver Accounts (FHSA) scheme will be abolished from 1 July 2015 due to lower than forecast take-up rates. New accounts opened from Budget night 2014 will not be eligible for concessions. The government co-contribution will cease from 1 July 2014. Tax concessions, and the income and asset test exemptions for government benefits associated with these accounts, will cease from 1 July 2015. Account holders will be able to withdraw their account balances without restriction from 1 July 2015. Impacts: − Communication obligations - regulations will be made to ensure that anyone seeking to open a new account from Budget night 2014 is informed of these changes by the account provider. Existing account holders will continue to receive the government co-contribution, and all tax and social security concessions associated with these accounts, for the 2013/14 year. − Once the FHSA scheme is abolished from 1 July 2015, FHSA accounts will be treated like any other account held with a relevant provider. 7. Agricultural Production Levies The Government has announced adjustments to the production levies of a number of agricultural items, including increasing the “hard onions” levy and export charge from $2 to $4 a tonne.
Posted on: Sat, 06 Dec 2014 10:39:43 +0000
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