FIRST HOME OWNER GRANT (NEW HOMES)
On and from 1 July 2014, the first home owner grant cap has been increased from $650,000 to $750,000. This means that an eligible transaction that has a total value of up to $750,000 will qualify for the first home owner grant for new homes. This applies to contracts entered into on or after 1 July 2014, or for owner builders if the building work commences on or after 1 July 2014. The grant will only be available for properties with a total value not exceeding the cap amount.
The First Home Owner Grant (New Home) provides a grant of $15,000 to help eligible first home buyers to purchase or build a new home. It replaces the $7,000 First Home Owner Grant from 1 October 2012. The grant of $15,000 applies to eligible transactions entered into on or after 1 October 2012 and before 1 January 2016. The grant will then be reduced to $10,000 from 1 January 2016 with no end date set.
ABOLITION OF VARIOUS DUTIES
Duty will be abolished from 1 July 2016 on:
BUDGET DEFICIT LEVY (TAX) OF 2% FOR INCOMES OVER $180,000
The Government announced the introduction of a Budget deficit levy (tax), to apply for 3 years commencing on 1 July 2014. The temporary levy will apply at 2% to every dollar earned above $180,000. For example individuals with a taxable income of $200,000 will pay 2% of $20,000 (levy of $400) and those with a taxable income of $300,000 will pay 2% of $120,000 ($2,400 of levy).
FBT RATE INCREASE FROM 47% TO 49%
To prevent high income earners from utilising fringe benefits to avoid the Budget deficit levy, the FBT rate will be increased from 47% to 49% from 1 April 2015 until 31 March 2017 to align with the FBT income year. The cash value of benefits received by employees of public benevolent institutions and health promotion charities, public and not-for-profit hospitals, public ambulance services and certain other tax-exempt entities will be protected by increasing the annual FBT caps. In addition, the fringe benefits rebate rate will be aligned with the FBT rate from 1 April 2015.
MEDICARE LEVY INCREASE TO 2%
The Medicare levy will increase from 1.5% to 2% from 1 July 2014. That was announced in last year's Budget and has been legislated. The intention of the increase is to help fund the proposed National Disability Insurance Scheme (NDIS), now renamed DisabilityCare Australia. This would mean that, coupled with the proposed new budget deficit levy, the effective top marginal tax rate would become 49% from that date.
Medicare levy surcharge and private health insurance offset thresholds to be frozen. The income thresholds for the private health insurance offset and the Medicare levy surcharge will be frozen for 3 years from 1 July 2015.
FAMILY TAX BENEFIT CHANGES
The Government will maintain current Family Tax Benefit (FTB) payment rates for 2 years from 1 July 2014. Under this measure, indexation of the maximum and base rates of FTB Part A, and the rate of FTB Part B will be paused until 1 July 2016.
The Government will reduce the Family Tax Benefit Part B (FTB-B) primary earner income limit from $150,000 per annum to $100,000 per annum, from 1 July 2015. The income threshold for the Dependent (Invalid and Carer) Tax Offset will also be reduced to $100,000 as it is linked to the FTB primary income earner limit. The Government will limit Family Tax Benefit Part B (FTB-B) to families whose youngest child is younger than 6 years of age from 1 July 2015. As a transitional arrangement, families with a youngest child aged 6 and over on 30 June 2015 will remain eligible for FTB-B for 2 years.
The Government will provide over 4 years a new allowance for single parents on the maximum rate of Family Tax Benefit (FTB) Part A whose youngest child is aged between 6 and 12 years old from the point when they become ineligible for FTB Part B. This allowance will provide $750 for each child aged between 6 and 12 years old in an eligible family from 1 July 2015.
PAID PARENTAL LEAVE SCHEME
The Government confirmed it would proceed with its Paid Parental Leave scheme from 1 July 2015. It will provide 6 months paid leave and will include superannuation.
SUPERANNUATION GUARANTEE (SG) RATE INCREASE FROM 9.25% TO 9.5%
The Government has announced a further one year delay to the timeframe for increasing the SG rate to 12%. The SG will now increase to 9.5% on 1 July 2014 and remain at this level until 30 June 2018 and then increase by 0.5% each year until it reaches 12% from 1 July 2022.
LOW INCOME SUPERANNUATION CONTRIBUTION (LISC) SCHEME TO BE AXED
The Government is pressing ahead with its decision to axe the Low Income Superannuation Contribution Scheme, which provides an annual super benefit of up to $500 for individuals earning less than $37,000.
CONCESSIONAL CONTRIBUTION CAPS
The concessional contribution caps are changing from 1 July 2014.
Age <49 Cap $30,000
Age 49+ Cap $35,000
ABILITY TO WITHDRAW EXCESS NON-CONCESSIONAL CONTRIBUTIONS
The government will allow individuals the option of withdrawing superannuation contributions in excess of the non-concessional contributions cap which avoids excess non-concessional contributions tax. Currently, contributions that exceed the non-concessional contributions cap are taxed at the top marginal tax rate. Non-concessional or personal contributions are post-tax contributions. Individuals who leave their excess non-concessional contributions in their superannuation fund will continue to be taxed on these contributions at the top marginal tax rate.
KEY CHANGES TO PENSIONS
From 1 July 2017, pension increases will be linked to inflation (CPI) rather than average weekly earnings. Over time, this will make superannuation savings even more important. The Government has also announced a tightening of the Age Pension means test with a three year freeze on all pension asset test and income test thresholds from 1 July 2017.
The Government announced that, from 1 July 2025, the Age Pension qualifying age will continue to rise by 6 months every 2 years, from the qualifying age of 67 years that will apply by that time, to gradually reach a qualifying age of 70 years by 1 July 2035. People born before 1 July 1958 will not be affected by this measure. These changes do not impact the age at which you can access your superannuation. Current pensioners and older workers approaching retirement will not be affected by this change.
CHANGES TO MANAGING ACTIVITY STATEMENTS
From 1 July 2014, if you or your tax agent lodges your activity statement via an electronic channel, you will no longer receive a paper activity statement for the next reporting period instead, it will become available in an electronic channel.
CHANGES TO PAYG WITHHOLDING ANNUAL REPORTING
Do you lodge your PAYG withholding annual report using disks or USB flash drives? If so, you will need to lodge your annual report online using the file transfer facility on the Business Portal at the ATO website or use Standard Business Reporting (SBR) enabled accounting or payroll software. To use the online services, you need an AUSkey.
PAYG INSTALMENTS THRESHOLD INCREASES
The Small Business Minister has announced changes to the pay as you go (PAYG) instalments entry and exit thresholds. From 1 July 2014, PAYG instalment thresholds will increase, which may mean you no longer need to pay instalments.
The entry and exit thresholds for:
There will no longer be a requirement for entities registered for GST to remain in the system if they have a zero instalment rate. If you no longer meet the entry rules you will be automatically exited from the PAYG instalments system. The ATO will send you a letter to notify you of your automatic withdrawal.
If you have received a recent activity statement you will be required to make payment by the due date, as this is for the quarter from 1 March 2014 to 30 June 2014. If you want to continue to pay instalments towards the end of year tax liability, you can voluntarily re-enter the PAYG instalment system. You can phone the ATO on 13 72 86 (Fast Key Code 2 1 1) and request you are manually entered to the PAYG instalment system.
For further information on any of the above please refer to the ATO website.
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