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Easy to read Q&A’s from Budget 2015

Treasurer Joe Hockey handed down the 2015/16 Federal Budget last Tuesday night.

Many of the proposed changes will affect young families, small business, retirees and women. This FAQ document is designed to help you understand the key Budget measures around the social security, tax, superannuation and child care. It’s important to note these measures must be legislated and passed through Parliament before they apply.

 

Q: What are the key Budget measures?

  • A childcare package, designed to help parents who want to work or work more.
  • Small business tax rate cuts and small business accelerated depreciation changes.
  • Changes to the Pension Assets Test Threshold sand Taper Rate to make the pension system more sustainable and boost the number of fully self-funded retirees.

Q: Can I still get the pension?

It will depend on the amount of assets you own, on top of the family home. There are major changes to the Pension Assets Test Thresholds which will see wealthier retirees lose access to a part pension or have their benefit reduced. On the other hand, many retirees will see no change to their pension entitlement or a slight increase.

 

Q: What are the changes to the Pension Assets Test Thresholds and Taper Rate?

The Pension Assets Test Thresholds for a part pension will be slashed to $823,000 from $1,151,500 for home owner couples and to $547,000 from $775,500 for home owner singles. As a result, approximately 91,000 retirees will lose access to a part pension and become fully self-funded retirees. A further 235,000 will have their pension reduced. Conversely, the lower Pension Assets Test Thresholds for the full Age Pension will increase to $250,000 from $202,000 for single home owners and $375,000 from $286,500 for couples who own their own home from January 2017. Basically, a retired couple who own their own home can have up to $375,000 in investments and still qualify for the full  Age Pension. Similar changes apply to non-home owners. Around 50,000 part pensioners qualify for  a full pension after these changes.

 

Q: Are there any changes to superannuation?

Superannuation emerged from the Budge in tact. There are no additional super taxes and no change to contribution caps. The government promised not to make any significant or negative changes to super and it kept that promise. Members of a public sector or corporate defined benefit superannuation scheme may be affected by changes to the way defined benefit income streams are counted against the social security income test, apart from that the only notable change to super is an extension of the Terminal Medical Condition Periodto24months. Currently,you cannot access your super until you’ve reached preservation age unless in special circumstances such as severe financial hardship or terminal illness.In the case of a terminal illness or injury, you must obtain a medical certificate certifying that you’re likely to die within 12 months. Extending the period to 24 months will make it easier and quicker for the terminally ill to access their superannuation money.

 

Q: How does the Budget impact on wealth accumulators and high income earners?

There isn’t a lot in the Budget specifically targeted at wealth accumulators or high net worth individuals although many will benefit from generous tax cuts for small business and a multi-billion dollar childcare package. There was some speculation ahead o Tuesday night that the Budget would seek to clamp down on Australia’s $29 billion system of franking credits for investors, however, there were no changes to the franking credit rate.

 

Q: What are the key measures in the ‘Jobs for Families’ childcare package and will they apply to me?

Low to middle-income families will benefit from the government’s flagship childcare package while higher income families will be relatively unscathed. A simplified means-tested childcare subsidy will be introduced from Jul y2017 which will see families earning between $65,000 and $170,000, around $30 better off a week. The new childcare subsidy will replace the Child Care Benefit, Child Care Rebate, and Jobs, Education and Training Child Care Fee Assistance (JETCCFA). It will be paid directly to child care providers which will dramatically lower the upfront cost of child care. Families earning up to $65,000 a year will receive 85 percent of child care fees.This is reduced to 50 percent for families earning $170,000 or more. Families earning less than $185,000 per year will no longer have a cap on the subsidy they receive. If the family’s income exceeds$185,000 a cap of $10,000 per child per year applies.

 

Q: Outline the small business tax rate cuts and accelerated depreciation of individual assets.

Small businesses, with an aggregated annual turnover under $2million,are set to receive a 1.5 percent tax cut from 2015/16. If legislated,the company tax rate will fall to 28.5 percent, representing the lowest level in almost 50 years. Small unincorporated businesses, with an aggregated annual turnover under $2million (such as sole traders and partnerships),will receive a 5 percent discount on the tax payable on their business income,up to the value of $1,000 per person per year. Also included in the Budget’s small business package are accelerated depreciation changes, an immediate deduction for small business establishment costs, capital gains tax relief for restructures and minor changes to employee share schemes. Under changes to the accelerated depreciation of assets, small businesses will get an immediate tax deduction for any individual assets they buy costing less than $20,000. The threshold currently sits at $1,000. This $20,000 limit will apply to each individual item and can be applied to an unlimited number of items.

 

Q: What will I pay more for under the Budget?

Depending on how much you earn and how much you work, you could be slugged with higher child care costs. Families earning over $65,000 a year with  a non-working stay-at-home parent stand to lose access to child care subsidies, under tougher work rules which require both parents to work at least eight hours a fortnight, or any other approved activity, in order to qualify for child care subsidies. Furthermore, if you download anything from the internet, such as movies and songs from iTunes, Netflix or Google Play chances are you’ll have to pay GST from July 2017.

 

Q: What happens next?

These measures, must be legislated and passed through Parliament before they apply. If you think you might be affected by some changes, you should call us on (7) 3223 6000. We'll be happy to help.

 

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