Federal Budget 2014

14/05/2014
Provided by Mercer.

The Abbott Government's first "contribute and grow" Budget marks a shift towards individual self-reliance by tightening access to welfare programs, government payments and health care.
 

Some of the key things you need to know

Compulsory employer super contributions will rise slower than expected after the Government capped Superannuation Guarantee (SG) payments at 9.5% for four years from 1 July 2014. Meanwhile Australians under the age of 49 will have to wait a further five years to access the age pension. One of the key messages from the 2014 Federal Budget is the importance of personal savings, including contributions to super.

What it means for you

Below you'll find a snapshot of the key things you'll need to consider when you're thinking how the budget might impact you, your family and your plans for the future.

 

Your Super and Retirement

 

SG contributions will not increase as quickly as expected and have been capped at 9.5% for four years, while the pension age will increase to 70.

Read more

 

A longer wait for the aged pension

Australians under 49 will wait an additional five years before they can claim an Age Pension, after the Government announced it would gradually lift the pension eligibility age to 70 by 2035.

 

Pension payments slow to rise

From September 2017 the pension will be indexed to inflation rather than pay increases, which means it will grow at a slower rate. Ultimately this will mean less money in your pocket if you're not fully funding your own retirement.

Superannuation Guarantee freezes at 9.5% for four years

Compulsory employer super will increase to 9.5% (currently 9.25%) on 1 July 2014. After this time, the SG rate will freeze for four years, until at least 2018.

 

Tighter access to Seniors Benefits

From 1 July 2014 the Commonwealth Seniors Health Card income test will include tax free superannuation income, making it harder to qualify for the card.

Card holders will also lose access to the senior supplement from 1 July 2014. This is currently $876.20 per annum for a single and $1,320.80 for a couple combined.

If you're considering relying on a part or a full age pension in retirement you will have to consider working longer. If you'd like to retire earlier, then planning is even more important.

 

Refund of excess voluntary contributions

Australians will no longer be penalised for inadvertently contributing above the non-concessional cap for superannuation.


 

You and Your Family

Some Family Benefits will be reduced, access to government payments will be tightened and the cost of higher education is set to rise.

Read more

 

Changes to Family Tax benefits

Family Tax Benefit Part B will only be available to families with an income below $100,000 and eligibility will cease once the youngest child is six years of age.

If your youngest child is six or over on 1 July 2015 you'll still be eligible for two years and single parent families will be eligible for a supplemental payment until the youngest child turns 12.

Families affected by this reduced level of income may need to budget accordingly in order to adjust to the reduced level of government support.
 

Supporting kids for longer

Unemployed people under 25 will no longer be eligible for Newstart. However, they may be eligible for the lower paying youth allowance and there will be a six month waiting period to qualify. People on Newstart under the age of 30 will be subject a "work for the dole" obligation.

This may increase the financial burden on parents with unemployed adult children as they may be the only means of support. Parents may need to consider the impact on their own finances.

 

Higher education costs

Young people are also likely to be faced with higher university costs as the Government deregulates university fees from May 2014. Higher demand universities are likely to become more expensive and graduates will begin repaying student loans earlier with the income threshold reduced by 10% to $50,638 from 2016/17.

Parents should consider the potential increase in the cost of educating their children.

 

 

Your Wealth

 

Those earning over $180,000 will pay an additional 2% on earnings over $180,000 as a "budget repair levy" for three years. Fuel costs will increase to help fund an $11.6 billion infrastructure plan.

Read more

 

High income earners to pay extra tax

High income earners, those earning $180,000 or more, will pay an additional 2 per cent "Budget Repair Levy" for three years from 1 July 2014. Fringe benefits tax will also be adjusted in line with this measure.

Those close to the $180,000 threshold may benefit from salary sacrificing contributions to superannuation. With the concessional contributions cap for people over the age of 50 set to rise to $35,000 from 1 July 2014, there are good opportunities to maximise tax effective superannuation contributions.
 

Higher fuel costs to fund infrastructure projects

The cost of petrol will rise with profits directed toward an $11.6 billion infrastructure improvement plan. The Government expects to raise $2.2 billion from this.

The focus on developing infrastructure may create opportunities for investors.

 

Mining and carbon tax abolished

The Minerals Resource Rent tax and carbon tax will be abolished but income support recipients will continue to benefit from existing clean energy supplement payments.
 

Reduced company tax rate

The company tax rate will be reduced to 28.5% from 1 July 2015. For large companies the reduction will be offset by the paid parental leave scheme.

It is unclear how this will impact franking credits until legislation is published but we will keep you posted.

 

Your Health

 

An additional $7 fee to see a doctor and $5 extra for medicines on the PBS will be introduced from July 1 2015. A portion of this will go to funding a new $20 billion Medical Research Fund.

Read more

 

Increased cost for health care

The Government has announced a $20 billion Medical Research Future Fund paid for from savings in health care revenue.

From 1 July 2015, Australians will pay an additional $7 to visit the doctor or the emergency room for non-emergency visits and an additional $5 charge for medicines under the Pharmaceutical Benefits Scheme (PBS). Concession card holders will only pay an additional $0.80 for PBS prescriptions.

A $5 reduction in the Medicare rebate is likely to be passed on to fee-paying patients and doctors will be able to charge a further $2. The bulk-billing fee will be capped at 10 services a year for concessional patients and children under 16.
 

 

Your Career

 

A new Paid Parental Leave scheme will provide six months paid leave up to a maximum of $50,000, including superannuation. As a result of some of the changes above you might need to prepare to be in the workforce for longer.

Read more

 

Paid parental leave

A new Paid Parental Leave scheme will provide six months paid leave up to a maximum of $50,000, including superannuation. This is designed to help address the disparity between the average retirement incomes of men and women by encouraging women to return to the workforce after having children.

If you're thinking of starting a family, or you have family or friends who might be in this situation, now is the time to start establishing goals and thinking about financial plans. There are a number of strategies in addition to the Paid Parental Leave Scheme, such as Spouse Contributions, that are available to those wanting to address this issue.

Read the Federal Budget papers.

 

 

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