The words “promise” and “commitment” have been thrown around quite a bit by both sides of parliament leading up to this year’s budget.
The Labor party has been keen to highlight that the proposed Deficit Levy breaks Tony Abbott’s pre-election comments that “taxes will always be lower under a Coalition government.”
Whilst the Coalition has been at pains to highlight that they have a commitment to protect Australia’s economy and financial position and that “when you’re in a difficult position, sometimes there needs to be some short-term pain for permanent and lasting gain.”
Whatever your political persuasion, most people would agree that clear direction and swift action are needed to ensure the nation’s long term financial health.
The national financial scorecard for the last twelve months would best be described as mixed.
On the positive side we’ve seen the Australian dollar drop slightly from uncomfortable highs leading to a late run in exports, business and household sentiment improving especially following the September election, the RBA cutting rates to 2.50% where they have remained since and a late pickup in the housing construction sector.
Yet we’ve also seen the economy slowing following a drop off in the investment phase of the mining boom, unemployment levels edging higher throughout most of the year, further uncertainty finding its way to Australian shores with spending cuts in the US and issues around China’s financial system and the general volatility that has plagued many markets.
It also has to be said that there is little in the way of true tax reform in this budget, with negative gearing and superannuation in particular being left unchanged.
The budget deficit is projected to fall from its current $49.9 billion to $29.8 billion next year, with a further decline to $2.8 billion in 2017-18. This will be seen by many as the Government delivering on its promise to “fix the economy”.
It’s a fine line the Government is trying to walk with a need and indeed action to reduce spending so as a country we live within our means, yet at the same time not wanting to dampen confidence and hence economic growth.
Some of the key changes affecting individuals and families (for the coming financial year unless otherwise stated) include:
- Reintroduction of the indexation of the fuel excise which will increase fuel costs over time and goods such as fresh food that have freight as a major cost input.
- Temporary Budget Repair Levy of 2% on incomes over $180,000 for 3 years commencing 2014‑15. (This means that for every dollar over $180,000, 49 cents will be lost in tax, or 50.5 cents if private health insurance is not held).
- If you are born after 1965, you will now not be able to access the Age Pension until age 70.
- Changes to deeming rules will reduce pension entitlement for some Pensioners.
- Pension increases in the future will be lower as they’ll now only go up by the CPI.
- A $7 patient contribution per service will be collected by the service provider (capped to the first 10 visits to the doctor by concession card holders and children under 16), starts 1/7/15.
- Costs of medicines under the PBS will be $5 higher (80 cents for Concession Card holders).
- The Family Tax Benefit payments will freeze at the current levels for 2 years.
- The primary earner income limit for the Family Tax Benefit Part B will be reduced to $100,000 p.a. from $150,000 p.a. (from 1/7/15) and eligibility will cease once the youngest child turns 6.
- A new allowance of $750 for single parents; subject to eligibility (from 1/7/15).
- The government will increase the compulsory superannuation rate to 9.5% (increasing from 1/7/18 by 0.5% each year until it reaches 12% in 2022/2023).
- Interest costs will be higher on unpaid HECS/HELP debt from 1/7/16 and the income level you can earn before compulsory repayments begin is expected to be $50,638.
- Paid Parental Parental leave scheme starts 1/7/15 (but the maximum salary payable for up to 6 months will now be $50,000 and the annual income threshold above which eligibility will cease, is now $100,000).
- Universities, TAFEs and colleges will be able to set their own fees from January 2016, which may increase course costs.
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