Federal Budget 2014/15

On 13 May 2014, the Treasurer handed down the 2014/2015 Federal Budget.

As we strive towards a system that allows us to sustain an aging population, we've become accustomed to changes that impact on super, savings and retirement benefits.

So what do this year's budget changes mean for seniors, families, individuals and companies when it comes to super?

We've summarised the super and related announcements below.

Superannuation

Super Guarantee rates

The current timetable to increase SG to 12% has changed. While the change to 9.5% from 1 July 2014 will continue to apply, further increases have been paused until 2018. The SG rate will then increase by 0.5% each year until it reaches 12% in 2022/2023.

Option to withdraw excess non-concessional contributions

The Government will allow individuals to withdraw superannuation contributions in excess of the non-concessional contributions cap made from 1 July 2013 and any associated earnings, with the earnings to be taxed at marginal tax rates. The details are yet to be worked out.

First Home Saver Accounts

The First Home Saver Accounts (FHSA) scheme will be abolished.

New accounts opened from 13 May 2014 will not be eligible for concessions, with the co-contribution to cease from 1 July 2014 and tax concessions and the income and asset test exemptions for Government benefits associated with these accounts to cease from 1 July 2015.

Existing account holders will continue to receive the co-contribution and all tax and social security concessions associated with these accounts for the 2013/2014 income year.

From 1 July 2015, account holders will be able to withdraw their account balances without restriction and these accounts will be treated like any other account held with a relevant provider.

Changes affecting seniors

Mature age worker tax offset to be abolished

From 1 July 2014, the mature age worker tax offset (MAWTO) will be abolished.

The Government considers that encouraging mature age workers to participate in the workforce can be achieved more effectively through direct payments or incentives.

A payment of up to $10,000 will be available to employers who hire a mature age job seeker aged 50 years or over, who has been receiving income support for at least six months.

Age Pension age to increase to 70 by 2035

The Budget confirmed the Treasurer's earlier announcement that the Government would raise the eligibility age for the Age Pension to 70 by 2035.

The Government announced that from 1 July 2025, the Age Pension qualifying age will continue to rise by 6 months every 2 years, from age 67 that will apply by that time, to a qualifying age of 70 years by 1 July 2035.

People born before 1 July 1958 will not be affected by this measure as their qualifying age is currently legislated at 67.

Commonwealth Seniors Health Card changes

The Government announced that from 1 January 2015, it will include untaxed superannuation income in the assessment of income to determine eligibility for the Commonwealth Seniors Health Card (CSHC). The assessment of superannuation income will be the same for CSHC holders as for Age Pension recipients.

All superannuation account-based income streams held by CSHC holders before the implementation date will be grandfathered under the existing rules.

The income thresholds for the CSHC will be indexed annually to the CPI from 20 September 2014.

Payments of the senior supplement for CSHC holders will cease from 20 September 2014.

Index Pension and Pension Equivalent Payments by the CPI

From 1 September 2017, the Government will index the Age Pension and equivalent payments in line with the CPI instead of a number of other indices.

Reset the Assets Test Deeming Rate Thresholds

The Government will change how it deems the return from a person's financial assets for the purposes of the pension income test. From 1 September 2017, the deeming thresholds will be reset from $46,600 to $30,000 for single pensioners and from $77,400 to $50,000 for pensioner couples.

Families

Medicare levy thresholds for families increased for 2013/14

From the 2013/14 income year, the Medicare levy low-income thresholds for families will be increased to $34,367 (up from $33,693 for 2012/13). The additional amount of threshold for each dependent child or student will also be increased to $3,156 for 2013/14 (up from $3,094).

Medicare levy surcharge and private health insurance offset thresholds to be frozen

From 1 July 2015, the income thresholds for the private health insurance offset and the Medicare levy surcharge will be frozen for 3 years.

Paid parental leave

The Government confirmed it will go ahead with a paid parental leave scheme (capped at incomes of $100,000 per year). While the details are yet to be clarified, it is expected that payments will be for 6 months and include superannuation.

Dependant Spouse Tax offset abolished

From 1 July 2014, the dependent spouse tax offset (DSTO) will be abolished for all taxpayers.

Personal taxation

Temporary Budget Repair Levy

From 1 July 2014 there will be a three-year 2% debt levy to apply to those with incomes over $180,000.

Certain rates linked to the top marginal rate will increase for the Temporary Budget Repair Levy over the three years.

 

2013/14

2014/15

2015/16 & 2016/17

 

 Threshold

Rates 

Threshold

 Rates

Threshold

 Rates

1st
rate

$18,201

19.0%

$18,201

19.0%

$19,401

19.0%

2nd
rate

$37,001

32.5%

$37,001

32.5%

 $37,001

33.0% 

3rd
rate

$80,001

37.0%

$80,001

37.0%

 $80,001

37.0%

4th
rate

$180,001 

45.0%

$180,001

47.0%

$180,001

47.0% 

Note: These are the current legislative rates adjusted for the Temporary Budget Repair Levy, and do not include adjustments to the tax free threshold and rates that were included in the carbon tax removal proposal.
These rates do not include the Medicare levy which is legislated to increase to 2% from 1 July 2014.

Companies

Reduction in company tax rate

The Government confirmed that from 1 July 2015 it will cut the company tax rate by 1.5 percentage points (from 30% to 28.5%).

 

The full Budget for 2014/15 is available on the Government's dedicated Budget website at www.budget.gov.au 

The information in this Federal Budget Update is based on proposed changes announced in the Federal Budget 2014/15 and is subject to legislation being enacted. The information is given in good faith and has been derived from sources believed to be reliable and accurate. No warranty as to the accuracy or completeness of this information is given and no responsibility is accepted by VicSuper Pty Ltd or its employees for any loss or damage arising from reliance on the information provided.

On 13 May 2014, the Treasurer handed down the 2014/2015 Federal Budget.

As we strive towards a system that allows us to sustain an aging population, we've become accustomed to changes that impact on super, savings and retirement benefits.

So what do this year's budget changes mean for seniors, families, individuals and companies when it comes to super?

We've summarised the super and related announcements below.

Superannuation

Super Guarantee rates

The current timetable to increase SG to 12% has changed. While the change to 9.5% from 1 July 2014 will continue to apply, further increases have been paused until 2018. The SG rate will then increase by 0.5% each year until it reaches 12% in 2022/2023.

Option to withdraw excess non-concessional contributions

The Government will allow individuals to withdraw superannuation contributions in excess of the non-concessional contributions cap made from 1 July 2013 and any associated earnings, with the earnings to be taxed at marginal tax rates. The details are yet to be worked out.

First Home Saver Accounts

The First Home Saver Accounts (FHSA) scheme will be abolished.

New accounts opened from 13 May 2014 will not be eligible for concessions, with the co-contribution to cease from 1 July 2014 and tax concessions and the income and asset test exemptions for Government benefits associated with these accounts to cease from 1 July 2015.

Existing account holders will continue to receive the co-contribution and all tax and social security concessions associated with these accounts for the 2013/2014 income year.

From 1 July 2015, account holders will be able to withdraw their account balances without restriction and these accounts will be treated like any other account held with a relevant provider.

Changes affecting seniors

Mature age worker tax offset to be abolished

From 1 July 2014, the mature age worker tax offset (MAWTO) will be abolished.

The Government considers that encouraging mature age workers to participate in the workforce can be achieved more effectively through direct payments or incentives.

A payment of up to $10,000 will be available to employers who hire a mature age job seeker aged 50 years or over, who has been receiving income support for at least six months.

Age Pension age to increase to 70 by 2035

The Budget confirmed the Treasurer's earlier announcement that the Government would raise the eligibility age for the Age Pension to 70 by 2035.

The Government announced that from 1 July 2025, the Age Pension qualifying age will continue to rise by 6 months every 2 years, from age 67 that will apply by that time, to a qualifying age of 70 years by 1 July 2035.

People born before 1 July 1958 will not be affected by this measure as their qualifying age is currently legislated at 67.

Commonwealth Seniors Health Card changes

The Government announced that from 1 January 2015, it will include untaxed superannuation income in the assessment of income to determine eligibility for the Commonwealth Seniors Health Card (CSHC). The assessment of superannuation income will be the same for CSHC holders as for Age Pension recipients.

All superannuation account-based income streams held by CSHC holders before the implementation date will be grandfathered under the existing rules.

The income thresholds for the CSHC will be indexed annually to the CPI from 20 September 2014.

Payments of the senior supplement for CSHC holders will cease from 20 September 2014.

Index Pension and Pension Equivalent Payments by the CPI

From 1 September 2017, the Government will index the Age Pension and equivalent payments in line with the CPI instead of a number of other indices.

Reset the Assets Test Deeming Rate Thresholds

The Government will change how it deems the return from a person's financial assets for the purposes of the pension income test. From 1 September 2017, the deeming thresholds will be reset from $46,600 to $30,000 for single pensioners and from $77,400 to $50,000 for pensioner couples.

Families

Medicare levy thresholds for families increased for 2013/14

From the 2013/14 income year, the Medicare levy low-income thresholds for families will be increased to $34,367 (up from $33,693 for 2012/13). The additional amount of threshold for each dependent child or student will also be increased to $3,156 for 2013/14 (up from $3,094).

Medicare levy surcharge and private health insurance offset thresholds to be frozen

From 1 July 2015, the income thresholds for the private health insurance offset and the Medicare levy surcharge will be frozen for 3 years.

Paid parental leave

The Government confirmed it will go ahead with a paid parental leave scheme (capped at incomes of $100,000 per year). While the details are yet to be clarified, it is expected that payments will be for 6 months and include superannuation.

Dependant Spouse Tax offset abolished

From 1 July 2014, the dependent spouse tax offset (DSTO) will be abolished for all taxpayers.

Personal taxation

Temporary Budget Repair Levy

From 1 July 2014 there will be a three-year 2% debt levy to apply to those with incomes over $180,000.

Certain rates linked to the top marginal rate will increase for the Temporary Budget Repair Levy over the three years.

 

2013/14

2014/15

2015/16 & 2016/17

 

 Threshold

Rates 

Threshold

 Rates

Threshold

 Rates

1st
rate

$18,201

19.0%

$18,201

19.0%

$19,401

19.0%

2nd
rate

$37,001

32.5%

$37,001

32.5%

 $37,001

33.0% 

3rd
rate

$80,001

37.0%

$80,001

37.0%

 $80,001

37.0%

4th
rate

$180,001 

45.0%

$180,001

47.0%

$180,001

47.0% 

Note: These are the current legislative rates adjusted for the Temporary Budget Repair Levy, and do not include adjustments to the tax free threshold and rates that were included in the carbon tax removal proposal.
These rates do not include the Medicare levy which is legislated to increase to 2% from 1 July 2014.

Companies

Reduction in company tax rate

The Government confirmed that from 1 July 2015 it will cut the company tax rate by 1.5 percentage points (from 30% to 28.5%).

 

The full Budget for 2014/15 is available on the Government's dedicated Budget website at www.budget.gov.au 

The information in this Federal Budget Update is based on proposed changes announced in the Federal Budget 2014/15 and is subject to legislation being enacted. The information is given in good faith and has been derived from sources believed to be reliable and accurate. No warranty as to the accuracy or completeness of this information is given and no responsibility is accepted by VicSuper Pty Ltd or its employees for any loss or damage arising from reliance on the information provided.