click to view in your browser

BRM Holdich E-News

14 May 2013

2013 – 2014 Federal Budget

Summary

The following sections summarise the relevant taxation announcements made by the Federal Government in releasing the 2013 – 2014 Federal Budget on 14 May 2013.

Key proposed measures, many of which had already been announced, include:

  • Deferral of the legislated changes to personal income tax rates and thresholds that were to apply from 1 July 2015,
  • The increase in the rate of medicare levy to 2% from 1 July 2014;
  • Not much of significance for small to medium businesses tax affairs, instead there are a number of Corporate Tax Integrity measures;
  • Capping of tax free pension earnings at $100,000 from 1 July 2014;
  • Increase in the concessional contributions cap to $35,000 for those aged 60 or over from 1 July 2013, and also for those aged 50 or over from 1 July 2014;
  • Introduction of legislation enabling the withdrawal of excess concessional contributions from 1 July 2013;
  • Additional 15% contributions tax for those with income above $300,000;
  • Phase out of the medical expenses tax offset commencing 1 July 2013;
  • Capping of deductions for self-education expenses at $2,000 from 1 July 2014; and
  • HELP discounts to be abolished from 1 July 2014;

Please contact us should you require further information or would like to discuss any of these items.

Personal Income Tax Rates and Thresholds, Increased Rate of Medicare Levy

The release of the Federal Budget has confirmed the already announced deferral of the increase in the tax free threshold legislated to occur on 1 July 2015.  Therefore, the personal income tax rates and thresholds to apply from 1 July 2015 are now proposed to be as detailed in the following table:

Taxable Income

Current

From 1 July 2015

$0 - $18,200

Nil

Nil

$18,201 - $37,000

19c for each $1 over $18,200

19c for each $1 over $18,200

$37,001 - $80,000

$3,572 plus 32.5c for each $1 over $37,000

$3,572 plus 33c for each $1 over $37,000

$80,001 - $180,000

$17,547 plus 37c for each $1 over $80,000

$17,762 plus 37c for each $1 over $80,000

$180,001 and over

$54,547 plus 45c for each $1 over $180,000

$54,762 plus 45c for each $1 over $180,000

 

The impact of the deferral of the tax free threshold increase was minimal in any event with any benefit from the change clawed back once taxable income reached $80,000 and the amount of the tax benefit below that income was not significant.

Note that the already legislated increase in the 32.5% tax rate to 33% remains, and that the reduction in the low income tax offset to $300 from $450 from 1 July 2015 also remains.

The Federal Budget announcement also confirmed the increase in the rate of medicare levy to 2% effective from 1 July 2014.

Business Measures

Unlike the previous few Federal Budgets, this announcement did not include much of significance for small to medium businesses tax affairs, instead there are a number of Corporate Tax Integrity measures, these include:

  • Measures targeting multinational profit shifting structures;
  • Changes to foreign resident capital gains tax regime;
  • Prevention of ‘dividend washing’ and doubling up of franking credits;
  • Loopholes to be closed for consolidated groups;
  • Double Tax Agreement with Switzerland;
  • Funds for ATO compliance on restructuring activities; and
  • Restriction on immediate deduction for mining rights.

Superannuation Measures

Capping of tax free pension earnings

The release of the Federal Budget has confirmed the already announced capping of tax free pension earnings.  The tax exemption for earnings on superannuation fund assets supporting income streams will be capped at $100,000 per annum per member from 1 July 2014.  Earnings above this level will be taxed at the standard rate of 15%.

Increase in the concessional contributions cap

The Federal Government has also confirmed that it will introduce legislation to increase the concessional contributions cap to $35,000 (presently $25,000) for those aged 60 or over from 1 July 2013.  Further, the cap will then also increase to $35,000 for those aged 50 to 59 from 1 July 2014.  The concessional contributions tax for all taxpayers is presently $25,000.

Withdrawal of excess concessional contributions from 1 July 2013

It is proposed that legislation will be introduced to enable individuals to withdraw from their superannuation fund any excess contributions made from 1 July 2013.  Under this measure the withdrawn excess contributions will be taxed at the individual’s marginal income tax rate plus an interest charge to reflect the timing benefit.

Additional 15% contributions tax for those with income above $300,000

Individuals with an income for surcharge purposes of $300,000 or greater will incur an additional 15% tax on their superannuation contributions.  This measure results in the effective tax rate on the superannuation contributions for impacted individuals increasing from 15% to 30%.

Deferred Lifetime Annuities Concessional Tax Treatment

From 1 July 2014 deferred lifetime annuities will be granted the same concessional tax treatment that superannuation assets supporting income streams receive.

Individual Measures

The Federal Budget included the announcement of a number of tax measures impacting individuals, these include:

  • Phase out of the medical expense tax offset commencing 1 July 2013;
  • The capping of deductions for self-education expenses at $2,000 from 1 July 2014;
  • HELP discounts for upfront and voluntary payments to be abolished from 1 January 2014;
  • The medicare levy low income threshold for families has been increased; and
  • A number of social security changes.

Important: This is not advice.  Clients should not act solely on the basis of the material contained in this Bulletin.  Items herein are general comments only and do not constitute or convey advice per se.  Also changes in legislation may occur quickly.  We therefore recommend that our formal advice be sought before acting in any of the areas.  The Bulletin is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

 

BRM Holdich
Level 8, 420 King William Street
Adelaide SA 5000

Unsubscribe