I’m prepared to accept that there may be some people out there that find the Federal Budget a little boring. Hey, stop yawning – I haven’t even started!
For anyone who just wants an absolute bare bones budget breakdown, I’ve prepared a summary of the main points below. At the very least you can pretend to care if one of your friends or family members raises the matter.
And for anyone who would like a more comprehensive look at what this year’s Federal Budget involved, I’ve catered for your tastes too.
First, the breakdown.
Wayne Swan’s 6th and possibly last budget (his Swan Song??) was not as tough as expected. He’s anticipating savings of $44 billion over four years, with the budget expected to be back in surplus in three years time.
From an investor perspective, there were not many new announcements, as most of the changes to superannuation were announced a few weeks ago.
A summary of some of the changes that may impact investors are:
- The personal income tax cuts scheduled to commence on 1 July 2015, will be deferred. These tax cuts had already been legislated so this will actually require an amendment to the legislation. The changes were to be funded by the carbon pricing, which has been lower than anticipated and therefore will be deferred until the carbon price hits $25.40.
- The Medicare levy will be increased by half a percentage point from 1.5% to 2% from 1 July 2014 to provide funding for DisabilityCare Australia. This has already been introduced into Parliament and will most likely be passed before the election.
- The proposed increase to the Medicare levy will take the top marginal tax rate to 47% (previously 46.5%), which means a number of other tax rates based on this combination will also be increased to 47% from 1 July 2014. These include increasing Fringe Benefits Tax and the tax rate on excess non-concessional contributions.
- The Medicare levy low-income threshold for families will increase to $33,693 for the 2012-13 year, with effect from 1 July 2013.
- The net medical expenses tax offset (NMETO) will phase out from 1 July 2013, with a two year “phase-out” arrangement for those currently entitled to the offset.
- Swan announced a pilot program for age pension recipients when downsizing their home. Rather than having “leftover” sale proceeds means tested, they will be able to deposit up to $200,000 in a special bank account and it will be exempt from testing for 10 years (including the earnings). Importantly, the funds are only exempt if you do not make a withdrawal. This will be trialled over a 3 year period.
- There have been a number of changes which may impact families including removing the Baby Bonus in July 2014, changes to Family Tax Benefit A which is now only paid until the calendar year when the child finishes school, and “pauses” on indexation for certain family based payments (Paid Parential Leave, Family Tax Benefit A & B) and child care rebate.
- The annual amount claimed as a tax deduction for self-education expenses will be limited to $2,000 per person. This doesn’t apply to employer funded expenses where there are currently no limitations (this doesn’t include salary sacrifice).
- Something that wasn’t mentioned in the budget was further discounting of the minimum pension from July 2013. We can probably assume by the omission that the discounted rate hasn’t been extended and will most likely refer to standard rates on 1 July 2013.
If you’d like a youtube update that runs for less than 4 minutes, just go to https://www.youtube.com/watch?v=xB2fpMSsZ3U