We’ve been reading all the budget rumors for the last few weeks as to what will be have installed for families but as of Tuesday the 13th May 2014 we now know.

In his first budget, Treasurer Joe Hockey has spread the pain across all sectors of the community with spending cuts and tax increases in an attempt to balance the budget in five years’ time.

Family Tax Benefit changes

The government will freeze the 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.

FTB Part B threshold change

A proposed reduction to the FTB Part 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.

FTB Part B limiting

The budget will limit FTB Part 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 Part B for the next 2 years.

New FTB allowance for single parents

The government will provide $155m over 4 years for a new allowance for single parents on the maximum rate of 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.

Removal of FTB Part A per child add-on

A proposed removal of the FTB Part A per child add-on for each additional child from 1 July 2015.

Revising to the FTB end-of-year supplements

The Abbott government will revise the FTB end-of-year supplements to their original values and ceasing indexation from 1 July 2015. The revised supplements will provide $600 per annum per FTB Part A child and $300 per family per annum for each FTB Part B family.

Tax increase on the wealth

Joe Hockey announced the introduction of a Budget Deficit Levy (tax) of 2% to apply for 3 years from 1 July 2014 for incomes over $180,000. Individuals with taxable income of $200,000 will pay 2% of $20,000, a levy of $400. Those with taxable income of $300,000 will pay 2% of $120,000, $2,400 of levy.

If the temporary Budget deficit levy is implemented, the rates for the year commencing 1 July 2014 would be:

2014-15 income year
Taxable income $ Tax payable $
0 – 18,200 Nil
18,201 – 37,000 Nil + 19% of excess over 18,200
37,001 – 80,000 3,572 + 32.5% of excess over 37,000
80,001 – 180,000 17,547 + 37% of excess over 80,000
180,001+ 54,547 + 47% of excess over $180,000

Medicare levy increase to 2% on 1 July 2014

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.

Medicare levy thresholds for families increased for 2013-14

From the 2013-14 income year, the Medicare levy low-income thresholds for families will be increased to $34,367 (up from $33,693 for 2012-13). The additional amount of threshold for each dependent child or student will also be increased to $3,156 for 2013-14 (up from $3,094).

Medicare Rebates and the Pharmaceutical Benefits Scheme

Australians will lose access to free visits to see a doctor with plans to introduce a new $7 fee for GP consultations and increased prices for medicines. For patients with concession cards and children aged under 16 the additional GP fee will apply for only the first 10 services in each year.

Medicare rebates for specialist and all health services except GP care will be frozen which could leave patients facing higher charges as doctors increase their fees in line with inflation.

Medicines, too, will become more expensive. The government will gain $1.3bn over four years by increasing the Pharmaceutical Benefits Scheme co-payments and safety net thresholds. For general patients the cost will rise by $5 to $42.70 in January next year, while concessional patients face a lower increase of 80c to $6.90.

First Home Saver Accounts scheme abolished

The First Home Saver Accounts (FHSA) scheme will be abolished. New accounts opened from Budget night will not be eligible for concessions, with the Government co-contribution to cease from 1 July 2014 and tax concessions and the income and asset test exemptions for Government benefits associated with these accounts to cease from 1 July 2015. Existing account holders will continue to receive the Government co-contribution and all tax and social security concessions associated with these accounts for the 2013-14 income year. As of 1 July 2015, account holders will be able to withdraw their account balances without restriction.

Hopefully these updates provide you with an overview of the proposed budget changes that may affect your family and some of the changes that may pass both Houses of Parliament.

Joe Hockey said during this budget speech that “the age of entitlement is over. It has to be replaced, not with an age of austerity, but with an age of opportunity”.

What do you think about this new “age of opportunity” for your family, do you think it’s a fair budget or has it gone too far?

Author

Michael is qualified public practice accountant who loves working with business owners and new technologies. Having being involved with his own multimillion $ start-ups, been CFO for others, he now helps others with their financial and tax goals.

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