If you’re like most Australians, you’re busy paying the bills and saving for retirement, as well as accessing services like healthcare, education, child care and aged care. So how will the Federal Budget 2015-16 change the way you live and work on a practical day-to-day level?
The good news to start with is that the Federal Treasurer confirmed there will be “no new taxes on superannuation under this government” during his Budget speech.
Here’s a brief round-up of what the budget could mean for the rest of your family finances—whether you’re starting out in your working life, building a career and family, or enjoying the fruits of your labour in retirement. But don’t forget—the proposals may change as legislation passes through parliament.
Reforming child care payments
Proposed from 1 July 2017
A new single Child Care Subsidy (CCS) will aim to meet the cost of child care for parents engaged in work, training, study or other recognised activity.
The CSS replaces the Child Care Benefit, the Child Care Rebate and the Jobs, Education and Training Child Care Fee Assistance.
To be eligible for the CCS, you’ll need to:
- pass an activity test;
- send your child to an approved child care service; and
- meet immunisation requirements.
The government will also spend $869 million on the Child Care Safety Net to help vulnerable and disadvantaged children.
And from 1 July 2016, a proposed Nanny Pilot Programme will help with the cost of care for around 10,000 children whose parents work shifts or live in rural and remote areas.
Removing ‘double dipping’ on paid parental leave
Proposed from 1 July 2016
You will no longer be able to receive payments from both your employer and the government’s Paid Parental Leave Pay (PPLP) scheme. However, all primary carers will have access to parental leave payments that are at least equal to the maximum PPLP benefit (currently 18 weeks at the national minimum wage).
Giving tax breaks to small businesses
The government has announced a number of tax breaks for businesses with an aggregated annual turnover of less than $2 million.
- Corporate tax rate reduced from 30% to 28.5% [proposed from 1 July 2015]
- Unincorporated small businesses will be eligible for a 5% business income tax offset, capped at $1,000 a year. [proposed from 1 July 2015]
- Fringe benefits tax changes for work-related electronic devices [proposed from 1 April 2016]
- Capital gains tax roll-over relief for business entity restructures [proposed from 1 July 2016]
- Immediate tax deductions for assets under $20,000 [from 7.30pm on 12 May 2015 until30 June 2015]
And new business start-ups will be allowed to immediately deduct a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice.
Rationalising work-related car expense deductions
Proposed from 1 July 2015
The government is rationalising the rules around work-related car expense tax deductions. This doesn’t affect car leasing and salary sacrifice/fringe benefits arrangements.
Increasing Medicare levy low income thresholds
Proposed from 1 July 2014
For the 2014-15 year, the Medicare levy low income threshold will be indexed. For singles, the threshold will increase to $20,896 and for couples $35,261, plus $3,238 for each dependent child. For single seniors and pensioners the threshold will increase to $33,044. If your taxable income is below the relevant threshold you’re not liable for the Medicare levy.
Encouraging young people into work
The government is encouraging young Australians to join the workforce by:
- funding a new Youth Employment Strategy with $330 million
- providing $18 million over four years for around 6,000 job seekers annually to undertake valuable work experience for up to four weeks while they continue to receive income support.
Tightening ‘portability’ rules around receiving benefits while overseas
The government has announced changes to the overseas portability rules which will affect some age pensioners and people who receive Family Tax Benefit – Part A (FTBA).
- Age Pension – Currently, Age Pension recipients who have spent less than 35 years in Australia between ages 16 and 65 begin to receive a reduced payment rate once they have been out of Australia for more than 26 weeks. This period is proposed to be reduced to 6 weeks proposed from 1 January 2017.
- FTBA – Currently, FTBA recipients receive their usual rate of payment for up to 6 weeks while overseas. After this period it reverts to the base rate of payment for a further 50 weeks. Proposed from 1 January 2016, FTBA recipients will only receive payments outside of Australia for 6 weeks in a 12 month period.
Relaxing criteria for access to super – Terminal medical condition
Proposed from 1 July 2015
Currently, patients must have two medical practitioners (including a specialist) certify that they are likely to pass away within one year to gain unrestricted access to their superannuation. The Government will change this period to two years, giving terminally ill patients earlier access to their super.
Rebalancing pension asset test thresholds
Proposed from 1 Jan 2017
The government has announced changes to the assets test thresholds for the age pension.
And for every $1,000 your pension is over the threshold, your pension will now reduce by $3.00 a fortnight – double the previous amount.
So if you own your home and you have assets of less than $289,500 (single) or $451,500 (couple), your pension will increase. But if you have more assets your pension will be reduced.
And what isn’t changing?
Some measures announced in last year’s Budget will not proceed, including:
- Deeming thresholds will not be reset to $30,000 for singles and $50,000 for pensioner couples.
- Eligibility thresholds for pension payments will not be frozen for three years from 1 July 2017.
- Pension payments will not be indexed by CPI from 1st September 2017. This means that pensions will continue to be indexed to the higher of the increases in the CPI, Male Total Average Weekly Earnings or the Pensioner and Beneficiary Living Cost Index.
How the Budget affects you will depend on your personal circumstances and where you’re at in life. Here are some key callouts.
Just starting out
- Incentives to undertake work experience and join the workforce
- Increased Medicare levy low income thresholds
- Reforms to child care payments
- Nanny pilot programme for rural and remote families
- Removal of ‘double dipping’ on paid parental leave
- Tax cuts for small businesses
- Changes to taxation of Employee Share Schemes to make it easier for small start-ups to offer share or option plans
- Tightening of rules on work-related car expense deductions
- Changes to overseas portability rules for family tax benefit
Nearing retirement or retired
- Rebalanced pension asset test thresholds
- Relaxed criteria for access to super – terminal medical condition
- Changes to overseas portability rules for age pension
Like to know more?
To find out more about how the Budget could affect you, go to www.budget.gov.au or speak to us.
Again the proposals may change or be withdrawn as legislation passes through parliament.
Need more information?
For more information on how the Federal Budget 2015/2016 will affect your personal financial situation, please contact us today on 3231 4250.
Note: Any advice contained in this document is general in nature and does not consider your particular situation. Please do not act on this advice until its appropriateness has been determined by a qualified financial adviser. Whilst the tax implications have been considered we are not, nor do we purport to be a registered tax agent. We strongly recommend you seek detailed tax advice from an appropriately qualified tax agent before proceeding.
“This document or website contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making an investment decision. Charter Financial Planning Limited and its authorised representatives do not accept any liability for any errors or omissions of information supplied in this document except for liability under statute which cannot be excluded.”