Budget 2014 Tax Cuts Summary

On the surface, the 2014 budget looks tough.

However, from an accountants point of view, the budget 2014 does not impose many changes that directly affect personal income tax returns. Instead, the changes directly impact various government benefits such as welfare, pensions and family payments. 

Chris Richardson, Partner, Deloitte Access Economics made the following comments on ABC TV:
  • “Tough but not as tough as Howard/Costello in their first two terms or Hawk/Keating in the late 80’s.”
  • “Budget in need of repair.”
  • Not been pumped up [spending tied directly to proposed realistic revenue receipts].
  • Likey deferred interest rate rises by RBA [due to the impact in the economy and likely low inflation].
The following is a brief summary of budget 2014 that will directly impact Australian taxpayers.

Families:

  • From 2015, Family Tax Benefit Part B (FTB-B), which will be cut for families when their youngest child turns six.
  • Income test for FTB of main income earner reduced from $150000 to $100000.
  • All Family Tax Benefit payments will be frozen and remain at current rates for two years.
  • The income eligibility for Family Tax Benefit Part A (FTB-A) will remain at $94,316 regardless of the number of children in the family.
  • End of year FTB supplements to be reduced.
  • “Large Family Supplement” will be limited to families with four or more children.
  • New payment for single parents receiving the full FTB-A, with $750 for each child between six and 12 years of age.
  • Current payments and eligibility for the Child Care Rebate and Child Care Benefit will continue unchanged.

General:

  • Superannuation Guarantee to increase from 9.25% to 9.5% on 1 July.
  • Superannuation Guarantee will then be frozen until June 30 2018 – beyond the end of the forward estimates - before increasing 0.5 per cent a year thereafter to eventually hit 12 per cent.
  • The Dependent Spouse Tax Offset, which until now was available to people with dependent spouses of age 60 or older, will be discontinued.
  • The Mature Age Worker Tax Offset will also be abolished.
  • New scheme, entitled Restart, will encourage companies to hire older workers by offering bonuses of up to $10,000 for the hiring of over-50s who have been on unemployment benefits or the disability support pension for more than six months.
  • Co-payment of $7 for visit to GP or emergency department.
  • Abolishing the First Home Saver Accounts scheme. New accounts opened from Budget night will not be eligible for concessions, with the Government 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.
  • Fuel Excise to rise twice a year (recommencement of indexation) .

Welfare:

  • From January, new job seekers under 30 will have to wait up to six months before receiving unemployment benefits, and will then have to participate in Work for the Dole.
  • At least 25 hours per week of Work for the Dole activities in order to receive payments for six months.
  • The new Work for the Dole program will be phased in from July, with job seekers aged between 18 and 30 years, who have been unemployed for 12 months and receiving payments, forced to do 15 hours per week for six months.
  • From next year, unemployed people under 25 will no longer qualify for Newstart and instead will have to apply for the lower benefit rate of Youth Allowance.

Students:

  • Under changes to higher education, more students will receive financial help, but they will also have to pay more for their degrees.
  • Increase to student loan interest rates to reflect the cost of Government borrowing. The rates will be allowed to rise to up to 6 per cent, instead of being set at the the rate of inflation - currently sitting at 2.9 per cent.
  • From July 2016, students will have to pay back their loans sooner, with repayments starting when they earn over $50,638 a year.
  • Financial assistance for all students studying diploma and bachelor degree courses at approved higher education institutions, including TAFE and private colleges.
  • And, from July, those learning a trade will also be able to apply for loans of up to $20,000 over a four-year apprenticeship. But apprentices will lose grants offered under the $914 million program Tools for your Trade, set up under Labor.

Business:

  • Cut to company tax by 1.5 percentage points for around 800,000 small businesses.
  • Proposed company tax cuts for large businesses relating to Parental Leave Scheme on hold
  • Cuts to various government grants to businesses.

Copyright 2014. My Tax Zone.