Federal Budget 2014
Temporary Budget Repair (TBR) Levy
Introduction of a TBR Levy on high income earners. It will apply from 1 July 2014 until 30 June 2017 at a rate of 2% on individuals taxable income in excess of $180,000. For example, an individual with a taxable income of $250,000 will pay a levy of $1,400 per annum.
Personal Income Tax Rates
As currently legislated, including the newly announced TBR Levy, the personal Income Tax Rates and thresholds are summarised below.
Note that these rates do not include the Medicare Levy which is currently 1.50% and will rise to 2.0% effective 1 July 2014.
Fringe Benefits Tax (FBT) Rate
The Government announced that to prevent high income earners from utilising Fringe Benefits to avoid the TBR Levy, the FBT Rate will be increased from 47% to 49% from 1 April 2015 to 31 March 2017.
Superannuation Guarantee (SG) Rate
Announced that the Government will amend the schedule for increasing the SG Rate to 12%.
In order to give certainty to employers and employees, the SG Rate will increase from 3.25% to 9.50% from 1 July 2014 as currently legislated. The rate will then remain at 9.50% until 30 June 2018, then increasing by 0.5 percentage points each year until it reaches 12% on 1 July 2022.
Repeal of Minerals Resource Rent Tax (The Mining Tax)
Important to note that the Government is still intending to proceed with the repeal of the Mining Tax, which include (amongst other measures) the following:
– Repeal of Company Loss Carry Back Rules for the 2013/14 income year
– Reduction of Small Business instant asset write off threshold from $6,500 to $1,000 from 1 January 2014
– Repeal of small business $5,000 accelerated motor vehicle deduction from 1 January 2014
This leaves small business in limbo – if the Mining Tax is repealed, will the 1 January 2014 start date still apply retrospectively? The Budget remained silent on this front.
Excess Non Concessional Contributions
Proposed by the Government to allow individuals the option of withdrawing superannuation contributions made from 1 July 2013 that exceed their non concessional contributions cap and any associated earnings, with these earnings to be taxed at the individual’s marginal tax rate.
This measure will ensure that inadvertent breaches of the non concessional contributions cap do not incur a disproportionate penalty.
Research & Development (R&D) Tax Offset
The Treasurer announced that the R&D Tax Offset will be reduced by 1.5 percentage points from 1 July 2014.
Consistent with the Government’s commitment to cut the company tax rate from 1 July 2015, the reduction in the rate of offset will preserve the relative value of the R&D Tax Incentive.
For a business with less than $20m turnover, the R&D Tax Offset will decrease from 45.0% to 43.5% from 1 July 2014.
From 1 July 2014, it is proposed that a seniors employment incentive payment commence, known as the Restart Program. A payment of up to $10,000 will be made to employers who hire a worker over 50 years of age and has been on income support for 6 months or more. Payment will be made in instalments as follows:
Announced that from 1 July 2025, the Age Pension qualifying age will continue to increase gradually from 67 to 70 years.
People born before 1 July 1958 will not be affected by this measure.
Seniors Health Card
The Government will include untaxed superannuation income in the assessment of income to determine eligibility for the Commonwealth Seniors Health Card (CSHC) from 1 January 2015.
All superannuation account-based income streams held by CSHC holders before 1 January 2015 will be grandfathered under existing rules.
Dependent Spouse Tax Offset
The Government will abolish the Dependent Spouse Tax Offset from 1 July 2014.
Mature Age Workers Tax Offset
The Government will abolish the Mature Age Workers Tax Offset from 1 July 2014.
Family Payments System Reform
Reforms to Family Payments System from 1 July 2015:
– Family Tax Benefit Part B eligibility changed such that child will need to be under 6 years of age and primary earners income limit decreased from $150,000 to $100,000 per annum
– New Supplement of $750 per annum for each child aged 6 to 12 years of age, for single parents who receive maximum Family Tax Benefit Part A.