In a tough budget year there is no good news for individuals. Bracket creep will be used to raise revenue over the four year budget forecast period. Medicare levy and the FBT rate will increase by 0.5% to fund the DisabilityCare initiatives and the Government continues to wind back superannuation concessions.
Tax rates
The proposed income tax reductions that were to take effect from 1 July 2015 have been deferred. Once again bracket creep is being used to fund expenditure. The tax rates for residents are:
| Threshold | Marginal Rate |
| nil to $18,200 | 0% |
| $18,201 to $37,000 | 19% |
| $37,001 to $80,000 | 32.5% |
| $80,001 to $180,000 | 37% |
| $180,001 and above | 45% |
Fringe Benefits Tax
Rate increases to 47%; an increase of 0.5% to match the increase in medicare levy to fund DisabilityCare.
Family Tax Benefit Part A and Baby Bonus
The proposed boost to the Family Tax Benefit Part A (which was to increase by $300 for those with one child and $600 for those with more) has been scrapped. This will save $1.8 billion over three years.
The Baby Bonus has been scrapped and there are significant reforms to the Family Tax Benefit Part A and Paid Parental Leave that may compensate some parents.
Superannuation
The Government has argued that the tax concessions provided under the superannuation system are unsustainable and have looked to wind back these concessions.
Initially, in the prior year Federal Budget the Government announced taxing super contributions by tax payers earnings greater than $300K at a 30% tax rate (instead of 15%).
In a press release on 5 April 2013, the Government has looked to further wind back these tax concessions by:
- taxing superfunds in pension mode with annual earnings greater than $100,000 at 15% from 1 July 2014. There are still a number of technical issues that are required to be resolved such as "How to deal with multiple accounts?";
- introducing capital gains tax on assets held in superfunds in pension mode. The transitional rules will not tax capital gains on assets held at the date of the announcement until 2024. Any assets acquired after 1 July 2014 will be fully subject to capital gains tax.
- For assets that are purchased from 5 April 2013 to 30 June 2014, individuals will have the choice of applying the reform to the entire capital gain, or only that part that accrues after 1 July 2014;
- providing the same concessional tax treatment to investment annuities that applies to investment earnings on superannuation assets; and
- simplifying the proposed higher concessional contributions cap that had been proposed for individuals with less than $500,000 in super. This has been able to generate budget savings by reducing the cap to $35,000 but allowing it to be accessed by anyone that meets certain age conditions. It will apply from 1 July 2013 for people aged over 60 and 1 July 2014 for those aged over 50.
Fortunately, the extremely annoying tax on excess super contributions is to be rectified by taxing the excess contributions at a person's marginal tax rate (plus an interest charge) rather than at the top marginal tax rate. Individuals will also have the choice of withdrawing any excess concessional contributions from their super fund.
457 Visas
Whilst spending cuts are a priority the Government has found funds to provide a funding boost to crack down on 457 scheme abuse. Whilst there will always be isolated incidences of rorting of any Visa scheme our experience is that 457 Visas are not being widely abused and the Government has not been able to provide any evidence of wide spread rorting.
This appears to be a populist political initiative to appease unions and we believe that there would be more worthy areas to spend money.
Attachments
Employment Taxes (including Superannuation) - Moore Stephens Federal Budget 2013 Insights
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