Tonight's Budget announcements, while reasonably tough, were not particularly surprising considering all of the speculation leading up to the event. Of course, passing these measures through Parliament will be an interesting challenge indeed.
With a little luck, our Budget deficit will fall from its current $49.9 billion level to $29.8 billion next year, closing in on surplus territory by 2017-18.
Thankfully, the Government held firm on its commitment not to make adverse changes to superannuation, although changes to social security and the temporary budget levy are likely to impact a number of clients.
Focusing on the financial planning space, the three key areas for clients to consider are as follows:
Personal Income Tax and the Budget Repair Levy
With the exception of the temporary 'Budget Repair Levy', personal income tax and thresholds will remain unchanged from 1 July 2014.
The Budget Repair Levy will essentially be a 2% tax on individual's taxable income in excess of $180,000 pa. The levy is scheduled to last three years (2014-15, 2015-16 and 2016-17).
Individuals with taxable income of $180,000 or below will pay no levy.
Commonwealth Seniors Health Card
At present, superannuation account-based income is excluded from the Commonwealth Seniors Health Card (CSHC) income test, which is $50,000 for singles and $80,000 for couples.
However, from 1 January 2015, the Government will begin including superannuation income to determine eligibility for the CSHC.
Please note that all superannuation account-based income streams held by CSHC holders before the January implementation date will be 'grandfathered' under the existing rules.
Increase the Age Pension age to 70
As widely expected, from 1 July 2025, the Age Pension qualifying age will continue to rise by six months every two 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.
There are many other proposals worth noting, particularly in the area of family payments and job seekers. To read a more detailed report, click here.
Over the next few weeks, we'll pour over the finer details and let you know if there is anything else you should be aware of. In the meantime, please feel free to call me personally if you have any questions or concerns.
Rick Maggi. (Westmount. Financial Solutions)