Refer below for a concise summary of the Federal Budget 2013/14 delivered last night.
Personal Tax Rates
- Personal tax rates (excluding Medicare Levy) remain unchanged and will apply for financial years FY2013 / FY2014 / FY2015
- Previously planned increase in the tax free threshold from $18,200 to $19,400 will not proceed
Medicare Levy
- Medicare Levy will increase from 1.5% to 2% commencing 1 July 2014
- Levy increase pushes the effective top marginal tax rate to 47%
- Medicare Levy low income threshold for families will increase to $33,693 for the current financial year FY2013
- Additional amount of threshold for each dependent child or student increases to $3,094
Medical Expenses Tax Offset
- Medical Expenses Tax Offset will be phased out
- Eceptions apply to out of pocket medical expenses relating disability aids / attendant care / aged care
- Taxpayers who claim the offset in FY2013 will be eligible to claim in FY2014
- Taxpayers who claim the offset in FY2014 will also be eligible to claim in FY2015
Baby Bonus
- Baby Bonus will be replaced by changes to Family Tax Benefit Part A from 1 March 2014
- Family Tax Benefit Part A payments will increase by $2,000 for birth of the first child, and $1,000 for subsequent children
- Parents on Paid Parental Leave will not be eligible for the additional Family Tax Benefit Part A component
Family Tax Benefits
- Higher income thresholds for family benefits will be maintained for a further 3 years to 1 July 2017
- Family Tax Benefit Part B current upper income test limit of $150,000 will remain
- Dependency tax offsets, Paid Parental Leave, and Dad and Partner Pay will remain
- Family Tax Benefit Part A upper income free area will remain at $94,316 plus $3,796 for each subsequent child
- Family Tax Benefit supplement amounts will be maintained at current levels
Monthly PAYG Instalments Extended to Large Entities
- PAYG Instalments on a monthly basis will be extended to all large entities
- Entities include trusts / super funds / sole traders / large investors
- Transition will occur over the period from FY2014 to FY2017, depending on the entities turnover
Prevention of Doubling Up of Franking Credits
- Loophole to be addressed which currently enables sophisticated investors to double dip on dividend franking credits
- Legislation is yet to be developed
Capital Gains Tax Integrity Measures for Foreign Residents
- Changes will be made to the “principal asset” test in tax law
- Changes aim to ensure that indirect Australian real property interests are taxable if disposed of by a foreign resident
- A non final withholding tax of 10% will apply to the disposal by foreign residents of certain Australian property
Funding Provided for Data-Matching and Trust Tax Compliance
- The government will be providing the ATO with excess funding to improve data-matching and trust tax compliance
- The funding will be dedicated towards data-matching of ATO records with third party records to improve taxpayer compliance
- The funding will be also be dedicated towards targeting the exploitation of trust structures to avoid / evade tax
Superannuation
- No major reforms were announced in this area
Higher Education Loan Program (HELP) Discounts
- For HELP, the 10% discount for upfront payments, and the 5% bonus on voluntary payments will be removed from 1 January 2014