Well, we know that when times get tough, it makes get sense to stick to a budget, and ‘tighten one’s belt’ and that’s what the latest Australian Budget is all about. So what are some of the main changes and how will they affect you?
Pensions: Looks like we’ll be expected to work longer, but that’s cool with me. Not sure I could spend thirty years eating baked beans on a Superannuation Plan funded only by a percentage of forty-five years income. It’s also unlikely younger Aussies will get a Government Pension unless our workforce makeup alters. Changes include:
Pension payments will have the asset and income test thresholds frozen for 3 years from 1 July 2017
The Government will index pensions to inflation rather than wages from September 2017, this is expected to reduce increases.
The pension age will be increased to 70 by 1 July 2035, building on former Government’s move to increase the pension age to 67 by 1 July 2023.
Working Longer: The Government has acknowledged for older Australians to find jobs there needs to be a culture change. They’re offering up to $10,000 to businesses that employ Australians aged over 50 years who have been on unemployment or disability benefits for more than 6 months. I love that idea!
Healthcare: From 1 July 2015, previously bulk-billed patients can expect a charge of $7 per visit towards the cost of standard GP consultations and out-of-hospital pathology and imaging services. For concessional patients and children under 16, the contribution will be limited to the first 10 visits each calendar year. The Medicare levy will increase from 1 July 2014, to fund DisabilityCare, which was announced in last year’s budget.
Business gains and losses: The Government remains committed to cutting the company tax rate by 1.5% from 1 July 2015. For large companies this will offset the cost of the Paid Parental Leave Levy. For SMEs it will provide a boost to profits. The Government has also reinforced its promise to repeal the Minerals Resource Rent Tax (MRRT) and Carbon Tax. In addition, the Government introduced an Exploration Development Incentive to encourage investment in small exploration companies undertaking greenfields mineral exploration in Australia.
High income earners levy: A 2% levy will apply to those earning an income above $180,000. This for three years only from 1 July 2014 to 30 June 2017 and means those earning above $180,000 will pay the extra 2% levy on all income in excess of $180,000. e.g. if you’re earning $200,000 you will be faced with an additional 2% on $20,000 – a total levy of $400. Not too harsh!
Higher education – good and bad: The Government has announced it will deregulate the higher education sector and from 1 January 2016 will allow providers in Australia to set their own tuition fees. This is likely to increase the cost of education in Australia. The Government will continue to provide students a way to defer costs of study through HELP and graduates will begin to repay the debt only once their income reaches $50,638 from 1 July 2016.
And, from 1 July 2014, a tertiary loan system will be extended to TAFE students who will have access to 4-year concessional trade support loans to help them complete their trade course. That’s pretty cool!
More super: The Super Guarantee will increase from 1 July 2014 to 9.5%. It will then remain frozen for 4 years, after which it will increase 0.5% a year until it reaches 12% in July 2022.
So as expected, some winners, some losers in a tight budget. However, the morning headlines were overwhelmingly negative and could indicate that consumer confidence is likely to take a hit, at least initially.
This in turn likely means the RBA keeps rates on hold – possibly for the rest of the year, and maybe beyond. Each state will also be affected with hospital funding cuts and cuts to payments for education also. This will likely increase debt burdens of individual states, who in turn could look at increasing revenue through raising taxes.
So, some of the changes may affect you, and if you’re worried about how, get in touch with your Adviser for an assessment of your situation.