We watched the budget last night, we’ve been reading about it ever since and we’ve done all the hard work for you. Here are the highlights and the details of how the budget might affect you!
Plans to change the age pension indexation rate, announced in last year's budget, will not go ahead. Instead, more than 170,000 pensioners are expected to get about $30 a fortnight more under new arrangements proposed to start from 1 January 2017.
However, the Government will amend the assets test for determining eligibility for the age pension and reverse changes made in 2007 to the asset test taper rate. This will result in more than 235,000 pensioners receiving less than their current entitlement and around 91,000 people will lose the pension completely.
The proposed changes will increase the value of assets a person can have in addition to the family home (‘assets free threshold’), in order to qualify for a pension. From 1 January 2017, the assets free threshold is proposed to increase as follows:
A $3 taper rate will apply for every additional $1,000 in assets above the asset free threshold for a full pension.
From 1 January 2017, the government will reduce the maximum value of assets (excluding the family home) that a person can have to qualify for a part pension. The changes in the ‘maximum asset thresholds’ are:
Pensioners who lose pension entitlements from January 1 2017 as a result of the changes proposed in the May budget will remain eligible for the Commonwealth Seniors Card (or a Health Care Card for those under the pension age), that gives them concessions on medicines and bulk-billing.
From 1 January 2016 the Government will introduce an ‘income deduction cap’ on defined benefit income streams. Under this proposal, the level of income from defined benefit schemes that can be excluded from any income test will be capped at 10 per cent.
With the current pension rules, some people are able to exclude a percentage of their defined benefit income stream from the Age Pension means test.
For example: a couple with a defined benefit scheme income of $120,000 a year with a 50% deductible amount can exclude $60,000 from the income test. Only the remaining $60,000 is assessed as income under the income test, which results in the couple receiving a part pension of $7,400 per year in addition to their defined benefit income.
Under the proposed change this couple would no longer be eligible for a part pension.
This measure may potentially impact some QSuper members receiving a lifetime defined benefit pension, i.e. members with a State, Police or Parliamentary account.
Department of Veterans Affairs Pensions and defined benefit income streams paid by military superannuation funds are exempt from this measure.
The Government will implement measures from 1 July 2016 to reduce red tape for members and superannuation funds.
By removing redundant reporting obligations and streamlining lost and unclaimed superannuation administrative arrangements, the Government will make it easier for individuals to be reunited with their super.
In addition to this reduced red tape, these measures will also allow the Australian Taxation Office (ATO) to pay unclaimed superannuation directly to a person who is suffering a terminal medical condition.
The Government is also working with the New Zealand government to investigate whether it is possible for the ATO to pay unclaimed superannuation directly into a KiwiSaver account.
Currently, two medical practitioners must certify that a member is likely to die within one year in order for the member to gain unrestricted tax-free access to their superannuation balance through a ‘terminal medical condition’ condition of release. From 1 July 2015 the period will be extended to two years.
A number of changes to child care subsidies were announced under the Jobs for Families child care package including:
The Government is proposing to establish a concessional loan facility of up to $5 billion in the hopes of increasing private sector investment in infrastructure in northern Australia.
The Government is hoping to partner with the private sector and governments of Queensland, Western Australia and the Northern Territory to provide large concessional loans for the construction of ports, pipelines, electricity and water infrastructure.
The loan facilities will be open for applications from 1 July 2015.
A Serious Financial Crime Taskforce is being established to undertake investigations and prosecutions in relation to superannuation and investment fraud, identity crime and tax evasion. The Taskforce comprises a range of Australian Government agencies including the ATO, Australian Federal Police, AUSTRAC and ASIC.
Small business will receive a tax cut of 1.5% down to 28.5% - the lowest small business company tax rate in almost 50 years.
Small businesses will also be able to claim an immediate tax deduction for purchases up to $20,000.
The Government plans to introduce a new targeted tax avoidance rule directed at large multinational firms that seek to shift profits from sales in Australia to offshore ‘tax havens’.
From 1 July 2017, the Government will extend the application of GST to cross border supply of digital products and services imported by customers.
Under current law, digital products imported by consumers are not subject to GST.
The Government announced that it plans to double the penalties for large companies that enter into tax avoidance and profit sharing schemes.
Taxpayers who enter into these schemes may face having to pay the primary tax, interest and additional penalties calculated at 100% of the primary tax amount.
From 1 July 2016, it is proposed all new claimants of Newstart Allowance, Youth Allowance (Other) and Special Benefit under 25 years of age and who are eligible for a Stream A in jobactive, will be subject to a new rapid activation strategy, RapidConnect Plus.
This new strategy will require the claimant to undertake a number of additional job search activities within the first four weeks before they receive income support.
Please keep in mind, these budget changes are yet to be legislated and may be subject to change. We will keep you up to date on all proposed changes on our website and in our member newsletter Super Scoop.
For more information: http://www.budget.gov.au
QSuper: 1300 360 750.