Budget 2014/15 wrap-up

Treasurer Joe Hockey.

15-May-2014

By Financialobserver staff

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Hockey ends age of entitlement

Treasurer Joe Hockey has announced a levy for high-income earners as well as a raft of tax changes to end Australia’s age of entitlement and replace it with an age of opportunity.

The three-year temporary budget repair levy would be felt by Australians who earned more than $180,000, Hockey said in his maiden federal budget address in Canberra tonight.

The 2 per cent levy will come into effect on 1 July this year and remain in place until 30 June 2017.

It is expected around 400,000 taxpayers in 2014/15 will directly incur the levy and it will raise $3.1 billion over the forward estimates.

Individuals with taxable income of $180,000 or less will not pay the levy.

Those with taxable income of $200,000 will pay a levy of $400 a year, while those with taxable income of $300,000 will pay $2400.

To prevent high-income earners from using fringe benefits to avoid the levy... More here.


Govt slashes ASIC, ATO funding

The federal government has made $262.9 million in funding cuts to ASIC and the Australian Taxation Office (ATO) as part of a move to redirect money to repair the federal budget.

The corporate regulator would lose $120.1 million over five years, while the tax office would be without $142.8 million over three years, starting from 2015/16, according to details contained in tonight’s 2014/15 budget papers.

“ASIC will adjust its priorities to ensure it continues to meet its statutory objectives,” the government said in the budget papers.

“The savings from this measure will be redirected by the government to repair the budget and fund policy priorities.”

The tax office funding cuts would result in an earlier-than-scheduled reduction in ATO departmental headcount, the government said.

“The ATO will bring forward staff reductions that were already planned in response to efficiency dividends and decisions of the former government,” it said.

Under the Labor government, total staffing reductions of 4700 were to occur over the forward estimates period to 2017/18, it said. More here.


Associations to monitor ASIC, ATO after cuts

Australia’s peak financial advice associations will closely scrutinise the two key regulators to catch any adverse effects on industry regulation after $262.9 million in funding was cut from the organisations in tonight’s budget.

The budget papers revealed the government would slash $120.1 million from ASIC over five years, while the Australian Taxation Office (ATO) would lose $142.8 million over three years, starting from 2015/16.

“From our perspective, the question is how that is going to impact on ASIC and the regulation of the advice sector, so we’ll be looking closely at that in respect to what those implications will be,” FPA policy and government relations general manager Dante De Gori told financialobserver.

“ASIC will need to make a decision as to how they reallocate resourcing … to the fact that they have reduced funding so we’ll be watching that as well.

“The FPA has been pushing for a while now a greater cooperation or co-regulatory model, so I think there’s an opportunity here to work with ASIC to further enhance that model and there’s greater opportunity now for the FPA, as a professional body, to work with ASIC on that relationship and demonstrate our ability to help in respect to regulating our members.” More here.


Govt delays SG increase again

The federal government has delayed the planned increase in the superannuation guarantee (SG) to 12 per cent by one year, the second postponement of the rise in 12 months.

In May last year, the then Labor government said it would delay the increase from the originally planned target of 2019/20 to 2021/22.

But now it will not reach 12 per cent until 2022/23.

“The government will continue to increase the SG rate to 12 per cent from 9.25, but the changes will take place over a different time frame,” Treasurer Joe Hockey said in a media statement today.

Under the new time frame, the government will not pause at 9.25 per cent as previously announced, but will increase the SG to 9.5 per cent on 1 July and keep it at this level until 30 June 2018.

The SG will then increase by 0.5 percentage points each year until it reaches 12 per cent in 2022/23.

“This delay will avoid the fiscal cost of the earlier increase to 9.5 per cent,” Hockey said.

The change was necessary because the Senate had refused to pass “the government’s election commitment to defer the increase scheduled for 1 July 2014”, he said. More here.


Cap changes positive for SMSFs

The SMSF sector has welcomed the announcement in the budget allowing SMSF members to withdraw excess non-concessional contributions made after 1 July 2013.

“That is one of the best items in the budget for super this year and something that SPAA (SMSF Professionals’ Association of Australia) has been advocating for over recent years,” SPAA senior manager technical and policy Jordan George told financialobserver.

“It allows a taxpayer to withdraw any excess non-concessional contributions so they are not taxed at the 46.5 per cent rate anymore.”

Macquarie director David Shirlow agreed it was a positive announcement.

“That’s a positive, there’s no doubt about that. It looks as if the refunding mechanism will be somewhat different from the mechanism applying to excess concessional contributions, so I think quite a bit of consultation will need to take place to work through the mechanics of that,” Shirlow said.

AMP SMSF head of policy and technical Peter Burgess said the change made the rules around excess contributions more consistent.

“We now have a refunding solution for both types of contributions and I think that’s where we wanted to get to,” Burgess said. More here.


Pensions to be inflation-linked from 2017

The federal government has unveiled plans to link increases in pensions with inflation twice a year from September 2017.

The move would provide the government with $449 million in savings over five years and would involve the pension and equivalent payments and single parent payments being indexed to the consumer price index (CPI).

Payments affected by the change are the age pension, disability support pension, carer payment and veterans’ affairs pensions.

Currently, these payments are indexed in line with the higher of the increases in the CPI, male total average weekly earnings or the pensioner and beneficiary living cost index.

The savings from the measure would be redirected by the government to repair the budget and fund policy priorities, it said.

“We promised at the last election not to change pensions in this term of government and we won’t,” Treasurer Joe Hockey said tonight.

“But so that we can make pensions sustainable and affordable for decades to come, from September 2017, increases in pensions will be linked twice a year to inflation. More here.


Infrastructure high on govt agenda

The federal government will pump $11.6 billion into infrastructure investment to support Australia’s transition to non-resource sector-driven growth.

As part of the move, the government will reform Infrastructure Australia.

The multi-billion-dollar funding was the government’s response to the needs of the economy, it said.

“To address the mounting costs and inefficiencies that are unnecessarily delaying projects, this government is reforming Infrastructure Australia, which will improve infrastructure project planning, selection and delivery, and contribute to a strong pipeline of infrastructure projects,” the government said in its 2014/15 budget.

The government would, where possible, encourage greater reliance on “user charging” with the potential to stimulate significantly greater levels of additional private sector investment, it said.

“Over the next six years, the government will help build new roads, rail, ports and airports,” Treasurer Joe Hockey said.

“Our growth package will stimulate the construction sector and create thousands of jobs as the economy transitions from resource-led growth to broader-based growth.

“This new infrastructure will drive and support the next wave of national prosperity.”

The $11.6 billion in funding has been broken down into three separate projects, with $5 billion allocated to an asset recycling initiative, $3.7 billion for the infrastructure investment program and $2.9 billion for the western Sydney infrastructure plan. More here.

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