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The Bravien Breakdown - Budget2013

It is the morning after Wayne Swan's sixth budget, with the baby bonus abolished and a program of cuts to bring the budget back to surplus in four years' time.

Australia is in deficit to the tune of more than $19 billion, and the budget is not expected to be back in the black until 2016-17.


As expected, the centrepiece of the budget was a 10-year plan to fund the national disability insurance scheme (increasing the Medicare Levy from 1.5% to 2%) and the Gonski education reforms.


The superannuation tinkering did not extend any further in this Budget but re-enforced the announcements made on 5 April 2013.

Here's our Top10 from Budget2013 and the expected impact to you.

As always, please contact us with any queries.

The Team @ Bravien
Advice | Super | Retirement | Investment|Insurance
1300 BRAVIEN (1300 272 843)

BUDGET 2013 #1: Personal Income Tax - NO CHANGE

The Government will defer tax cuts until the carbon price is projected to be above $25.40 in the Budget. This is estimated to be in 2018-19. Tax rates for FY13/14 are as follows:


Taxable Income

Tax Payable / Marginal Rate

Up to $18,000

Nil

$18,201 - $37,000

Nil + 19% of each dollar over $18,200

$37,001 - $80,000

$3,572 + 32.5% of each dollar over $37,000

$80,001 - $180,000

$17,547 + 37% of each dollar over $80,000

Over $180,000

$54,547 + 45% of each dollar over $180,000

Impact to you: No change from FY12/13

BUDGET 2013 #2: Introduction of DisabilityCare Australia

The significant Budget reform is the introduction of DisabilityCare and the increase in the Medicare Levy by half a percentage to help fund it. The Medicare Levy will increase from 1.5% to 2.0% from 1 July 2014.

Low income earners will continue to receive relief from the Medicare Levy through the low-income thresholds for singles, families, seniors and pensioners.

Impact to you: A "Tax" increase is on the cards. If your income is:
• $55,000 pa: new levy increase = $275 pa
• $155,000 pa: new levy increase = $775 pa

BUDGET 2013 #3: Minimum Pension Payments

In response to the downturn in global financial markets, the Government provided pension draw down relief in 2008-09, 2009-10 and 2010-11 by halving the minimum payment amounts. This relief was extended in 2011-12 and 2012-13 by reducing the minimum payment amounts by 25 per cent.

As a result of the Budget being silent, it is expected that the minimum payment amount is to return to the normal rate in 2013-14.

Age

07-08

08-09
09-10
10-11

11-12
12-13

13-14

Under 65

4%

2%

3%

4%

65-74

5%

2.5%

3.75%

5%

75-79

6%

3%

4.5%

6%

80-84

7%

3.5%

5.25%

7%

85-89

9%

4.5%

6.75%

9%

90-94

11%

5.5%

8.25%

11%

95 or more

14%

7%

10.5%

14%

Impact to you: If you have been drawing the absolute minimum allocated/account based pension (ABP), your pension draw down amount will increase. For example, if your ABP is valued at $250,000 and you are 67 years old, your previous minimum would have been $9,375 pa. On 1 July 2013 your new minimum will increase to $12,500 pa draw down. This means more money coming out of the zero tax environment.


BUDGET 2013 #4: Concessional Contribution Caps

The Government decided to scrap the $50,000 concessional cap linked to super balances under $500,000. This will be replaced with an unindexed $35,000 concessional cap. From 1 July 2013, this will apply to all individuals aged 60 and over. From 1 July 2014 this will apply to individuals aged 50 and over. Legislation for this measure is expected to be tabled in Parliament this week.

Impact to you: You can now start to increase your salary sacrifice contributions to super if you are over 60. Up to $35,000 pa can go into your super (including the increasing 9.25% super guarantee) to help boost your retirement savings and minimise your personal tax.

For example: if you are over 60 and earning $91,000 pa, salary sacrificing an extra $10,000 to super would mean a reduction in personal tax of $3,900 (including the new extra DisabilityCare Australia levy) and an extra $8,500 in super after 15% contribution tax. That is good!

BUDGET 2013 #5: Deeming superannuation account based income streams

For Centrelink income test purposes, superannuation income streams are concessionally treated as a result of the calculation of a deductible amount that reduces the income amount assessed for benefit calculation purposes.

This concession will continue indefinitely for existing income streams. However, new superannuation account-based income streams starting on or after 1 January 2015 will be assessed under deeming arrangements applying to other financial investments.

Impact to you: For anyone starting a pension after 1 July 2015 and drawing more than the minimum pension from your account based/allocated pension, your Centrelink age pension will decrease. Effectively, they want you to spend more of your own money, not theirs.

BUDGET 2013 #6: Trial measure - Supporting seniors who downsize their home

The Government is running a trial to support Age Pensioners who want to downsize their home, without it immediately affecting their Age Pension.

Under the current rules, the value of the family home is not assessed and does not affect a person's pension. This means that many seniors may not sell the home because it would impact on their Age Pension.

The trial will allow eligible pensioners who have lived in their home for at least 25 years and want to downsize to put a minimum of 80% of the excess sale proceeds from the sale of their former home into a special account, up to a maximum of $200,000 (plus earned interest).

The funds (and earnings) in this account will not be counted under the pension income and assets test for up to 10 years or until a withdrawal is made from the accounts.

The trial will commence on 1 July 2014 and will run for three years. The Government will work with industry to establish these types of accounts.

Impact to you: If the trial is successful, downsizing your home will allow you to retain up to $200,000 without altering your age pension for 10 years. So your age pension would not drop but you'll loose access to spending that money. Under the current rules, that $200,000 would cost you a loss of $7,800 pa of age pension...but at least you can spend the $200,000!

We highly doubt this trial will even start - let alone remain.

BUDGET 2013 #7: Abolishing the Baby Bonus


New family payment arrangements will replace the Baby Bonus from 1 March 2014. The Baby Bonus will no longer be available.

From 1 March 2014, families eligible for the Family Tax Benefit (FTB) Part A will receive an additional loading on their family payments when they have a new born baby to help with upfront costs (if they are not accessing the Paid Parental Leave Scheme).

The extra FTB Part A payments for families will total $2,000 for their first child and $1,000 for subsequent children. It will be paid as an initial installment of $500, with the rest rolled into normal fortnightly payments over a three-month period.

Impact to you: If you'd like the bigger Baby Bonus, hurry up and have your baby! You have 2 weeks to get started!!


BUDGET 2013 #8: Companies, trusts, sole traders, individuals who earn high income from investments, and SMSF's will be required to pay tax monthly!

Impact to you: Increased compliance (and likely increased cost) as well as less cash working for you.

BUDGET 2013 #9: Child Care

Investments are being made to improve child care quality. The Government will provide up to $300 million over two years to help day care centres to attract and retain qualified professionals through wage increases. The Government will also provide $12.9 million over three years to trial flexible childcare arrangements for families who require care outside standard operating hours.

Impact to you: The maximum amount of the Child Care Rebate that can be paid to you will remain at $7,500 a year until 30 June 2017. No new measures will make childcare cheaper for you personally.

BUDGET 2013 #10: Tax Offsets

A number of tax offsets are being scrapped. The Government will phase out the net medical expenses tax offset (NMETO). The NMETO will only remain available for taxpayers for out of pocket medical expenses relating to disability aids, attendant care or aged care expenses, and this is only until 1 July 2019.

The Government is also restricting work-related self-education expense deductions, putting an annual $2,000 cap on these expenses from 1 July 2014.

Impact to you: You'll be spending more of your money on health and education.

 

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