On Tuesday night (14 May), the Federal Government released its budget. Much of its content had already been discussed before the release, but there were a few surprises.
As previously flagged, the Medicare Levy has been increased from 1.5% to 2%. This flows through into other tax rates linked to the top marginal rate, such as the Fringe Benefit Tax rate.
To the relief of the Superannuation Industry, there were no new announcements about the taxation of superannuation. The government only confirmed policy changes flagged earlier.
- An increase to the concessional cap from $25,000 to $35,000 for those over 60, effective from 1 July 2013. The same cap will be applied for individuals over 50 from 1 July 2014.
- The instalment of a 15% tax on superannuation earnings for those individuals whose superannuation earns over $100,000 a year, starting from 1 July 2014. This threshold will be indexed to the consumer price index, increasing in $10,000 increments.
- Contributions to superannuation that exceed the concessional cap will be able to be withdrawn, taxed at the individual’s marginal tax rate plus an interest charge instead of the top marginal rate. Thomson Reuters noted that taxpayers on the top marginal tax rate may have a slightly higher tax liability due to the interest charge if they chose to withdraw excess concessional contributions and suggests leaving the extra funds in the superannuation fund unless contributions would trigger a breach of the $450,000 bring forward rule for non-concessional contributions.
The government also confirmed the 30% tax on concessional superannuation contributions for individuals earning over $300,000 announced in the last budget would proceed. Legislation for this measure was recently released.
The government also noted minor amendments to the measure announced last year, including exempting employer contributions for Federal judges entitled to a benefit under the Judges’ Pension Act 1968 and employer contributions made to constitutionally protected funds for State higher level office holders, as previously flagged in the media. The government also notes it will use the same definition of income as used for calculating whether an individual is liable to pay the Medicare levy surcharge, which Thomson Reuters believed aims to hinder tax payers from manipulating their taxable income through salary packaging and negative gearing to avoid the tax.
Women on Boards
The government has announced $4.3 million in funding over five years to its BoardLinks program, established to form better connections between the Australian Government and women seeking Board positions. The aim is to help provide women with support, training and Board experience to increase the pipeline of women available for Board appointments.
Gender equity also received a boost with $6.2 million provided over four years to establish a Pay Equity Unit (announced in March) in the Fair Work Commission to assist with data and research collection, and specialist pay equity information. The Unit’s initial focus will be on the early childhood education and care sector.
The budget confirmed that those looking to improve their skills with self-education will have their expense claims capped at $2,000 from 1 July 2014.
The cost of 457 visas has almost doubled to $900. The government has also confirmed an additional $3.4 million in spending to “strengthen the integrity of the 457 visa program”.
The government confirmed the previously announced 12,000 Asian Century awards for two way exchanges with Asia – a positive for Boards and executive teams hoping to build their pipeline of Asia-capable candidates. These costs will be met from the existing resourcing of AusAID and the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education.