Budget Summary 2014 – Australian Federal Budget

Clamped Australian Dollar Notes

Treasurer Joe Hockey has come under considerable fire for the 2014 Federal Budget, and will face considerable challenges getting it passed. So, who will be impacted the most by the LNP’s proposed changes?

The Unemployed
Beginning January 1, 2015 jobseekers under the age of 30 and able to undertake full-time employment will have to participate in government-funded job-search and employment activities before receiving payments via either Newstart or the Youth Allowance. This will also apply to current recipients of either benefit, although their start date is delayed six months until July 1, 2015. Also, under 25’s applying for Newstart will be directed towards the lower paying Youth Allowance. While there will be recognition of prior employment, job seekers will be required to undertake at least 25 hours of Work for the Dole activities after they have received payments for six months.

Pensioners and Retirees
Labor’s plan to increase the pension age to 67 by July 1, 2023 and to 70 by July 1, 2035 is staying, and the way in which both the Age Pension and Disability Support Pension are indexed, using the inflation rate rather than the increase in average male income as the benchmark has been added. This will lead to slower increases in the pension as inflation is increasing more slowly than the average male wage.

High Income Earners
If you earn more than $180,000 per annum, you will be required to pay an additional 2% tax on amounts above that threshold for the next three years. This Temporary Budget Repair Levy is projected to raise an additional $3.1 billion and will affect approximately 400,000 Australians.

Labor’s Gonski reforms will be scrapped, with school funding indexation based on the inflation rate set to take effect from 2018. University fees will also be deregulated from 2016 (meaning universities will have the freedom to set their own tuition fee levels, which has the potential for a substantial impact on students). Government assistance for tertiary students will also change, with HECS and HELP loans earning interest to be determined in relation to government borrowing costs (up to a maximum 6 percent) rather than against inflation.

The Government has made changes to Family Tax Benefit Part B, with reductions in both the maximum income cap to receive the benefit (was $150,000 a year, will now be $100,000). Eligibility will continue only until the youngest child turns six, as opposed to the current 18. Replacing Benefit Part B for low-income single parents will be a new assistance of $750 per annum for each child aged between 6 and 12.

Sick People
Visiting your GP, getting blood tests or having X-rays will cost an extra $7 a time, although the pensioners and children will only be charged this fee for the first 10 visits annually. Prescriptions will increase by $5 (80c for concessional patients). The revenue generated will be directed to a $20 billion fund for Future Medical Research, which will be the largest of its kind worldwide.

Is there anyone who will benefit?
Other than the Medical Research Fund, small companies will receive a 1.5% tax cut (this benefit will be offset for large companies, who will pay a 1.5% levy to fund a paid parental leave scheme).

The LNP is introducing its promised Paid Parental Leave scheme, although it will be capped at an annual income of less than $100,000 per annum and will provide six month’s paid leave, including superannuation. It is hoped that this will reduce the imbalance between male and female superannuation savings.

The government has also announced an infrastructure growth package of $11.6 billion, which includes:

  • $5 billion on an Asset Recycling Fund, which will incentivise States and Territories to sell assets and invest in new infrastructure.
  • $2.9 billion on major roads and highways, including the Western Sydney Infrastructure Plan.
  • $3.7 billion on the Infrastructure Investment Programme, which will target high productivity projects for construction.

By Jennifer Lowe

If you would like to discuss how the budget could directly affect your personal or business circumstances, please contact us.

The post Budget Summary 2014 – Australian Federal Budget appeared first on Total Tax.