Last year's tough budget has been followed up with a budget aimed squarely at growing the economy.
According to Federal Treasurer Joe Hockey, this is a "responsible, measured and fair" budget with generous tax cuts for small business and a range of youth unemployment and infrastructure spending initiatives designed to stimulate growth.
Importantly, the government kept to its promise of no new taxes on superannuation. However, the budget contains significant changes to the age pension assets test and childcare subsidies.
Noted below is a summary of the key measures of relevance from a financial planning perspective. Importantly, most of the changes announced last night require support from the Senate (which has proven to be hostile over the past year).
Child Care Package
Effective Date: 1 July 2017
On 7 May 2015, the Minister for Social Services Scott Morrison announced that the Government will introduce a measure titled "Jobs for Families Child Care Package".
This package will eliminate the Child Care Benefit (CCB), Child Care Rebate (CCR) and Jobs Education and Training Child Care Fee Assistance (JETCCFA) payments to families, and incorporate them into a single means tested Child Care Subsidy.
Eligibility for the new Child Care Subsidy will be based on an activity test (i.e. number of hours spent working or studying) and a means test. Families with incomes of up to $60,000 (in 2013/14 dollars) will be eligible for a Child Care Subsidy of 85% of the lesser of the actual child care fees and a benchmark price per child ($11.55 per hour for long day care).
The subsidy rate will reduce to 50% for families with income of $165,000 and above. The subsidy amount will be capped at $10,000 per child for families with income of $180,000 and above. No cap will apply for family incomes of less than $180,000.
Child Care Subsidy payments will be paid directly to approved child care service providers. Families will pay the gap between the level of subsidy they receive and the actual fee charged by the service.
Age Pension Changes
Effective Date: 1 January 2017
From January 2017, the Government intends to increase the Age Pension lower asset test threshold to $375,000 for homeowner couples and $250,000 for homeowner singles ($575,000 and $475,000 respectively for non-homeowners).
In addition, the Government intends to increase the assets test 'taper rate' to the pre 2007 level of $3 for every $1,000 of assets above the lower limit (assets free area), rather than the $1.50 per $1,000 rate that currently applies.
The net impact of increasing the 'taper rate' will be that cut off level of assets for Age Pension homeowner couples will be $823,000 (currently $1,150,000) and for homeowner singles $547,000 (currently $775,000). For non-homeowners, the cut off level of assets will be $1,023,000 and $747,000 respectively.
The Government also confirmed it will not proceed with the proposed 2014/15 Budget changes relating to the Age Pension (namely changes to pension indexation and freezing for three years certain thresholds that relate to the pension income test).
Employee Share Scheme – Changes To Tax Treatment
Effective Date: 1 July 2015
In the 2014/15 Mid Year Economic Fiscal Outlook the Government announced changes to the tax treatment of employee share schemes to make them more accessible for Australian businesses and their employees.
Legislation is currently before the House of Representatives to enact the changes to the taxation of employee share schemes from 1 July 2015. Most significantly, the legislation will reverse some of the changes made in 2009 to the taxing point of rights.
The net impact of the above change will be that tax applies at the point at which the right is actually exercised (rather than the point at which the right is allowed to be exercised). This will remove the current situation whereby employees are being taxed even when shares have not been sold.
Changes To Calculating Work-Related Car Expense Deductions
Effective Date: 1 July 2015
The Government will alter the methods of calculating work-related car expense deductions from the 2015/16 income year.
Both the '12% of original value method' and the 'one-third of actual expenses method' will be removed. In addition, the three different rates applying (based on the vehicle's engine size) under the 'cents per kilometre method', will be replaced with one rate set at 66 cents per kilometre to apply for all vehicles.
There will be no changes to the 'logbook method' of calculating expenses. Further, these changes will not affect vehicles under leasing and salary sacrifice arrangements.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.