Budget 2014/15 – Tax and Super announcements

Yes… I got it wrong…

The first Budget of the current government is pretty much as expected on a tax and superannuation front.

The big news, which we already knew about, is that the Government will introduce a three-year levy, called the Temporary Budget Repair Levy from 1 July 2014.

The Temporary Budget Repair Levy will apply at a rate of 2% on individuals’ taxable income in excess of $180,000. This effectively means the highest marginal tax rate will go from 47% to 49% (remember that the Medicare Levy goes from 1.5% to 2% on 1 July 2014 so the highest marginal tax rate goes to 47%).

Therefore, for these high wealth individuals, if they can bring income into this year, or push deductions to the following year they can save 2% of the amount. Year-end tax planning this year will be interesting.

A number of other tax rates that are currently based on calculations that include the top personal tax rate will also be increased. For example, the FBT rate will be increased from 47 per cent to 49 per cent from 1 April 2015 until 31 March 2017.

On the Superannuation front the main announcement is that the Government will allow individuals the option of withdrawing superannuation contributions in excess of the non‑concessional contributions cap made from 1 July 2013. This will mean inadvertent breaches of the non-contribution cap will result in a disproportionate penalty.

The second super change is to the schedule for increasing the superannuation guarantee rate to 12%. The superannuation guarantee rate will increase from 9.25% to 9.5% from 1 July 2014. The rate will remain at 9.5% until 30 June 2018 and then increase by 0.5% each year until it reaches 12%.

Other than these changes, most of the other changes to the tax system are minor, and include the following:

  • Both the Dependent Spouse Tax Offset and the Mature Age Worker Tax Offset, which have been limited over the last years, will not be available for anyone from 1 July 2014.
  • The income thresholds for the private health insurance offset and the Medicare levy surcharge will be frozen for 3 years from 1 July 2015.
  • The Research and Development Tax Incentive will see its rates reduced by 1.5%, effective from 1 July 2014. This will mean the rate for the refundable offset will be 43.5%.
  • The Seafarer Tax Offset will be abolished from 1 July 2015 – has anyone ever heard of this before this budget????

Some other interesting announcements include in the budget are that:

  • The Government will introduce a receipt for taxpayers providing information about “where and how their taxes were used”. You will start seeing these from 1 July 2014;
  • The Government will reduce ATO funding by $142.8 million over three years from 1 July 2015; and
  • The Government will abolish the First Home Saver Accounts scheme form Budget night, with no further Government co‑contribution from 1 July 2014 and not tax concessions from 1 July 2015.

Late last year the Government announced what it is doing regarding the announced but unenacted measures of the previous government.  In the Budget the Government has changed its position in relation to some of these measures. The Budget states that the Government has decided to:

  • Not proceed with changes that would have applied to multiple entry consolidated groups;
  • Modify integrity measures in relation to the foreign resident CGT regime;
  • Modify integrity measures in relation to the consolidation regime;
  • Defer the start date of the new tax system for managed investment trusts by 12 months to 1 July 2015;
  • Defer the start date of reforms to the offshore banking unit regime to 1 July 2015;
  • Defer the start date of the legislative elements of the measure to improve tax compliance through third party reporting and data matching to 1 July 2016; and
  • Not proceed with changes to better target tax concessions provided to charities and other not-for-profits organisations.

In summary, other than year end tax planning for individuals with taxable income over $180,000, there is little for us to be concerned about.

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
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