2013-2014 Budget Reform Announcements

MEDICARE LEVY INCREASE TO FUND NDIS

The Australian Government will increase the Medicare levy by 0.5% from 1 July 2014 to help fund its proposed National Disability Insurance Scheme (NDIS), now renamed DisabilityCare Australia. This would take the Medicare levy from 1.5% to 2% of taxable income. Low income earners would continue to receive relief from the Medicare levy through the low income thresholds for singles, families, seniors and pensioners. The current exemptions from the Medicare levy would also remain in place, including for blind pensioners and sickness allowance recipients.

DEDUCTIONS FOR WORK-RELATED SELF-EDUCATION TO BE CAPPED

The Australian Government is currently proposing to cap the deduction for work-related self-education expenses per person to $2,000 effective from 1 July 2014.

The proposal was announced by the Treasurer on 13 April 2013 "as part of a package of reforms to make a down-payment on the National Plan for School Improvement" and was confirmed in the 2013 Budget. The paper examines the current treatment of education expenses including what qualifies as an education expense, and works through a range of issues related to the proposed cap, such as the effect of the cap on the depreciation of capital assets relating to education, the current $250 no-claim threshold and personal services income.

BABY BONUS

To target assistance to where it is needed most, the Government is introducing reforms to ensure the sustainability of the family payments system. From 1 March 2014, the Baby Bonus will be replaced by an increase to Family Tax Benefit Part A (FTB-A) of $2,000 on the birth or adoption of a first child and $1,000 for subsequent children. Pauses on indexation of higher income test thresholds for family payments, dependency tax offsets and FTB supplements will also be extended until 1 July 2017.

SUPERANNUATION CONCESSIONAL CONTRIBUTIONS CAP

The Government is simplifying the design and administration of the higher concessional contributions cap, by providing a $35,000 cap to anyone who meets certain age requirements. It is important for those who have not had the benefit of the SG for all of their working lives to be able to contribute more to their superannuation as they approach retirement. The start date for the higher cap will be brought forward to 1 July 2013 for those aged 60 and over, with those aged 50 and over able to access the higher cap from 1 July 2014.