May 22, 2013
Superannuation, Accounting & Taxation
The Budget delivered this week was disappointing and lacked substance to stimulate business confidence or boost the investment and support small businesses need.
It contained a small number of new announcements that deliver minor program changes, but predominantly reconfirmed measures previously announced.
Below we have summarised some of the key announcements relevant to small businesses.
We’ll be bringing further specifics to our client’s attention in due course, in line with your needs and circumstances. However, if you have any immediate questions about how these changes and announcements apply to you or your business specifically, please contact us and we’ll be happy to discuss them in further detail.
This summary does not include all the announcements contained in the Federal Budget 2013, only those most relevant to SME business owners.
Individuals and families
The proposed changes to the marginal tax rates and income thresholds, which were due to take effect from 1 July 2015, will be deferred until the estimated carbon price in the Budget reaches $25.40.
The table below summarises the thresholds and taxation rates that will continue to apply...
|Current income thresholds||Marginal tax rate|
|$0 - $18,200||0%|
|$18,201 - $37,000||19%|
|$37,001 - $80,000||32.5%|
|$80,001 - $180,000||37%|
Tax deductions for self-education expenses for individuals will be capped at $2,000 per annum from 1 July 2014.
The Medicare levy will increase by 0.5% to 2% per annum from 1 July 2014.
The Medicare levy low-income thresholds will increase from 1 July 2012 to take into account movements in the Consumer Price Index and to ensure that low income families and individuals are exempt from paying the levy as follows:
- Families - $33,693
- Additional amount of threshold for each dependent child or student - $3,094
- Individuals - $20,542
- Pensioners below age pension age - $32,279
The Net Medical Expenses Tax Offset (NMETO) will be phased out with transitional arrangements for those currently claiming the offset. Taxpayers will be able to continue to claim the NMETO for out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019. Taxpayers who claimed the NMETO for the 2012–13 income year will continue to be eligible for the NMETO for the 2013–14 income year if they have eligible out-of-pocket medical expenses above the relevant thresholds
Paid Parental Leave (PPL) introduced in 2011, will now be extended from 1 March 2014 by allowing parents to include time on PPL in the PPL work test for subsequent births, treating paid parental leave in the same way as employer-paid parental leave and enabling more families to access PPL as a result.
The Baby Bonus, which currently pays $5,000 to eligible parents for each new born or newly adopted child, will be replaced from 1 March 2014. Instead, families who are eligible for the Family Tax Benefit Part A (FTB (A)) will receive $2,000 following the birth of their first child, and $1,000 for each subsequent child as part of their usual FTB (A) payment, instead of a cash bonus payment.
From 1 January 2014, a family will only be eligible for Family Tax Benefit (A) until a child who is 16 years or older completes school.
From 1 July 2012, families will now only have 12 months from the end of the financial year to finalise their Family Tax Benefit or Child Care Assistance claim and determine if they’re eligible for an end of year supplement.
From 1 July 2013, the Superannuation Guarantee (SG) rate will start to increase from 9 to 12 per cent. The rate will increase from 9 to 9.25 per cent from 1 July 2013, and will continue to increase each year until it reaches 12 per cent from 1 July 2019. The Government will also abolish the maximum age limit on the Superannuation Guarantee from 1 July 2013, to increase the incentive for workers aged 70 and over to remain in the workforce and further boost retirement savings.
The concessional contribution cap will be increased from $25,000 to $35,000 per annum from:
- 1 July 2013 for people 60 and over, and
- 1 July 2014 for people 50 and over.
The cap will remain at $25,000 per annum for all other ages.
The table below outlines the proposed caps that will be available over the coming years.
|50 – 59||$25,000||$25,000||$35,000|
|60 and over||$25,000||$35,000||$35,000|
Individuals will be allowed to withdraw any excess concessional contributions made from their super fund from 1 July 2013. The excess concessional contribution will be taxed at the individual's marginal tax rate, plus an amount for interest.
Taxpayers with adjustable income up to $37,000 are entitled to a Low Income Superannuation Contribution (LISC) from the 2012/13 income year. The LISC measure is designed to provide a superannuation contribution of up to $500 annually for these individuals paid into a superannuation account of an individual to directly boost their retirement savings. Individuals with an entitlement below $20 will now be eligible for the LISC payable from 2013/14.
In the 2012 Federal Budget, the Government announced that individuals with very high incomes above $300,000 per annum will pay an additional 15% tax on their concessional super contributions. Draft legislation for this measure was recently released and was confirmed in the 2013 Budget.
On 5 April 2013, the Government announced changes to the taxation of earnings in super pensions. These proposed changes have been confirmed and the following is due to apply from 1 July 2014:
- all earnings on assets that support superannuation income streams will only be tax-free up to the first $100,000 per member, and
- earnings above $100,000 will be treated as income and taxed at 15%
Normal deeming rules (relevant for Centrelink benefits such as age pension) will apply to new account-based income streams assessed from 1 January 2015. This addresses the current inequity where pensioners with similar levels of financial assets receive different amounts of pension. Products held by pensioners before 1 January 2015 will be grandfathered.
From 1 July 2014, senior Australian homeowners who have owned their family home for at least 25 years and who decide to downsize will have the option to invest surplus funds (up to $200,000) in an account. The funds invested in the account and earned interest, will be exempt from the Age Pension means test for up to 10 years. $112.4 million in funding has been set aside to pilot this home downsizing program.
Deferred lifetime annuities will be granted the same concessional tax treatment that superannuation assets supporting income stream receive from 1 July 2014. Deferred lifetime annuities work as an insurance policy against outliving your life expectancy by allocating a portion of superannuation to a product that provides an ongoing income stream beyond a certain age.
For further information about how these changes and announcements will affect your business or you as a business owner, contact us.