Andrew Williams Posted May 13, 2015 Report Share Posted May 13, 2015 The Treasurer has handed down the Federal Budget for the 2015/16 year, with a focus on plans to restore confidence in the economy. In stark contrast to last year’s tough Budget, this year, tax cuts for small businesses, subsidies for families and changes to pension asset test took centre stage. Let’s look at what the 2015/16 Budget means for you. Changes to pension asset test Announced late last week, the Government has proposed changes to age pension eligibility based on the value of assets that you hold outside the family home. Some wealthier retirees will lose access to the pension as a result of the more stringent asset test thresholds and taper rate for pensions, while others will receive a pension increase. What’s proposed (from 1 January 2017): The taper rate which is the fortnightly amount, by which a person’s pension entitlement decreases under the assets test, will increase from $1.50 to $3 per $1,000 of assets over the lower threshold. The value of assets you can have in addition to your family home to qualify for a full pension would increase from $286,500 to $375,000 for couples who are homeowners. The maximum value of assets retired couples can hold outside of the family home and still qualify for a part pension would be reduced from $1.15 million to $823,000 under the changes. Couples who own their own home and have additional assets of less than $451,500 will get a higher pension. Couples who don’t own their own home and have assets up to $699,000 will be better off. Singles who own their own home and have additional assets of less than $289,500 will be better off. Singles who don’t own their own home and who have less than $537,000 will be better off. The value of assets you can have in addition to your family home to qualify for a full pension would increase from $202,000 to $250,000 for single homeowners. All people affected by these changes will still be eligible for the Commonwealth Health Seniors Card (CSHC) or the Health Care Card, which provide concessions for pharmaceuticals. Based on these changes, the Government estimates: 91,000 people will lose entitlement to the pension 235,000 people will have their pension reduced 170,000 people will receive a pension increase. Families Families using childcare are one of the winners in this year’s Budget, with $3.5 billion to be spent on child care assistance over five years. What’s proposed: From 1 July 2017, a new single Child Care Subsidy (CCS) will be introduced, based on family income. This will replace the existing child care benefit and child care rebate. The subsidy will be payable to families who use an approved child care service for a child who is under 13 years old. How it works: Families earning $65,710 or less will receive a subsidy of 85% of their child care fees (up to an hourly cap). The subsidy gradually tapers to 50% for families earning less than $185,710. Families earning $185,710 or more will have a $10,000 annual cap on the total amount of assistance provided per child per year. To be eligible for the child care subsidy, children must attend an approved child care service and meet immunisation requirements. The subsidy will be paid directly to child care providers. Eligibility for the child care subsidy will be determined by an activity test that aligns the hours of subsidised care with the amount of work, training or study done by parents. Other measures: ‘Nannies trial’ commencing 1 January 2016 to provide a subsidy to eligible families on incomes below $250,000 a year designed to help shift workers such as nurses, police, firefighters and ambulance officers Extra assistance for vulnerable children, including families experiencing temporary financial hardship Removal of ’double-dipping’ in paid parental leave from 1 July 2016. Access to parental leave pay will be limited to individuals whose employer does not provide parental leave entitlements. In cases where individuals get less generous parental leave entitlements from their employer, the Government will top up the amount paid to be equal to the full amount available under the existing scheme. Small business The Treasurer announced a package of measures aimed at small businesses (annual aggregate turnover of less than $2 million), in an effort to encourage them to invest, grow and employ more people. What’s proposed: From 1 July 2015, small companies will have their tax rate lowered from 30% to 28.5%. From 7:30pm on 12 May 2015 until 30 June 2017, small businesses can claim an immediate tax deduction for “each and every item” purchased up to the value of $20,000. Currently the threshold sits at $1,000. From 1 July 2015, there will be an annual 5% tax discount of up to $1,000 a year for unincorporated businesses – these are small businesses which are not run through a company structure. Other announcements Amendments to superannuation conditions of release to make it easier for people suffering a terminal illness to access their superannuation benefits from 1 July 2015. $1.2 billion in new funding for national security to bolster our intelligence capabilities and military operations. Implementation of a Multinational Anti Avoidance Law to stop large multinational companies avoiding tax. A 10% goods and services tax (GST) on internet downloads in an effort to capture more tax from multinational companies providing downloadable music, movies and books. This has widely been dubbed the ‘Netflix tax’ and will apply from 1 July 2017. New listings on the pharmaceutical benefits scheme to give subsidised access to more medicines. Current fringe benefits tax (FBT) exemptions or rebates available for not-for-profit and public health sector workers in hospitals and ambulance services on meals and entertainment will now be subject to an exemption cap of $5,000 from 1 April 2016. What next? It’s important to note that the proposed cuts and changes outlined in the Budget will not necessarily become law – they must first be passed by both the House of Representatives and the Senate. Budget papers revealed that tax receipts have been downgraded by $52 billion since the 2014 budget, against the backdrop of a major fall in the iron ore price. Despite that, the Government’s timetable back to budget surplus remains unchanged on last year, with the deficit reducing from $35.1 billion in 2015-16 to $6.9 billion in 2018-19. KR Andy © Colonial First State Investments Limited ABN 98 002 348 352 AFS Licence 232468. This document has been prepared by Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) based on its understanding of current regulatory requirements and laws as at 13 May 2015. This document is not advice and provides information only. It does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement available from the product issuer carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.