Budget Snapshot

The Federal Budget revealed a deficit of $19.4 billion this financial year with Wayne Swan forecasting that the Budget will be back in surplus by 2015/16. An interesting speech with few handouts prior to the election.

Source: SMH

Key Financial Planning Highlights

• Personal tax rate changes deferred for at least three years – due to the projected price of carbon being lower than expected
• Future increase in Medicare levy – from 1 July 2014 the Medicare Levy will increase 0.5% from 1.5% of taxable income to 2% of taxable income
• Age pension relief for pensioners considering downsizing their principal residence – the announcement of a pilot scheme to assist aged pensioners who wish to downsize their home. They will now be able to hold up to $200,000 in assets from the sale of their home and will receive an exemption from Age
• Pension income and assets tests for up to 10 years
• Removal of existing Baby Bonus – from 1 July 2014, the existing Baby Bonus scheme will be removed
• The phasing out of the net medical expense tax offset.   
• Pausing indexation on family payments and supplements.

Six main changes to Superannuation (previously announced but confirmed in the budget)
 
• Changes to concessional contribution caps – a higher concessional contribution cap of $35,000 will apply to people aged 60 and over from 1 July 2013. The higher cap will then become available to people aged 50 and over from 1 July 2014
• Higher tax on concessional contributions for high income earners – those earning over $300,000, will levied an additional 15% tax on their concessional contributions to super up to their relevant concessional contribution cap limit
• Changes to tax free treatment of superannuation in pension phase – From 1 July, 2014, the tax-free treatment of assets in supporting a superannuation income stream will be limited to the first $100,000 of earnings on those assets. Earnings above that will be taxed at 15%
• Changes to excess contributions – from 1 July 2013, individuals will have the ability to withdraw any excess concessional contributions and have them taxed personally at their marginal rate
• Deeming will be applied on account-based pensions purchased on or after 1 January 2015.
• Superannuation SG payments are confirmed to increase from 9% to 12% between 1/7/2013 and 1/7/2019

Non-Financial Planning Highlights

• Moving ahead with the Disability Care Australia Program – To be funded from the 0.5% increase to the Medicare Levy
• $24 Billion to be spent upgrading National Roads, including the M80 Ring Road
• $9.8 Billion to be spent over the next 6 years to upgrade schools
Australian Economic Growth was revised down from 3% to 2.75% for the next financial year.

Article source: Westpac