Federal Budget Newsletter – 2013

Overview

The Federal Government has announced that it is no longer able to deliver on its $1.5 billion projected budget surplus in 2013-14. Instead it will deliver a deficit of $18 billion in 2013-14 and look to return the budget to a surplus position by 2015-16 – of $0.8 billion.

GDP growth is forecast to remain close to trend at 2.75% in 2013-14 and rise to 3% in 2014-15. The unemployment rate is forecast to rise to 5.75% in 2013-14.

Superannuation

Increase in Concessional Contribution Caps

Legislation will shortly be introduced to increase the concessional contributions cap from the current $25,000pa cap to a $35,000pa cap from 1/7/13 for those aged over 60 and from 1/7/14 for those aged over 50.

Penalty Tax Changes to Excess Concessional Contributions

The penalty tax on excess contributions above the concessional contributions cap will be calculated at the member’s personal income tax rate. Previously, the penalty tax was calculated at 31.5%, resulting in a maximum overall income tax rate of 46.5% regardless of the member’s income level.

Superannuation Guarantee Rate to Begin to Increase

The Federal Government previously announced that from 1/7/13, the compulsory SG rate will begin to rise from its current 9% level and will gradually increase to 12% by 1/7/19. The government re-affirmed that the first increase will occur from 1/7/13 when the rate will rise from 9% to 9.25%.

Changes to Tax Payment Arrangements for Trusts and Superannuation Funds

All trusts and superannuation funds will now be required to pay their tax instalments on a monthly basis.

APRA Levy

The Federal Government has previously announced its intention to introduce an levy on super funds to help fund their ‘Stronger Super’ reforms. It is anticipated that some super funds will pass on the cost of this levy onto members. We expect the amount passed on will differ from fund to fund.

Medicare and DisabilityCare

DisabilityCare Australia

The Government has announced the establishment and rollout of DisabilityCare Australia (also known as the National Disability Insurance Scheme or NDIS) by 2016. This scheme is designed to provide financial support to Australians with significant and permanent disabilities.

Medicare Levy to Increase

The Medicare Levy will increase by 0.5% (from 1.5% to 2.0%) from 1/7/14 in order to establish and fund DisabilityCare Australia. It is expected this measure will raise $20.4 billion between 2014-5 and 2018-19.

Extended Medicare Safety Net Threshold to Increase

From 1/1/15, the Extended Medicare Safety Net (the point at which 80% of out of pocket medical expenses can be claimed from Medicare) for singles and wealthier families will increase from $1,221.90 to $2,000. These changes will not affect patients currently holding a health card or who receive FTB-A.

Medical Expenses Tax Offset Abolished

The 20% tax offset, claimable on net medical expenses exceeding $2,060, is to be abolished. All existing claims will be grandfathered for 2 years and claims for aged care, disability aids and attendant care will remain claimable until 20/6/19.

Other Notable Announcements

Baby Bonus to be Abolished

The Baby Bonus will be abolished in its current form. Instead, the payment will be amalgamated into the Family Tax Benefit – Part A (FTB-A) scheme. The amount of the payment will be reduced to $2000 for the first child and $1,000 for subsequent children. The eligibility rules fall under the same arrangements all other benefits paid under FTB-A.

Selling the Family Home

Many Senior Australians will now be able to downsize the family home (if owned for over 25 years) and invest 80% of the surplus funds (up to $200,000) into a special account which would be exempt from the age pension means test for 10 years.

Increase in 457 Visa Application Fee

The government has announced that the application fee for a 457 Visa will increase from $455 to $900 from 1/7/13.