Well last night we received the first Abbott government budget and it was one of the most highly anticipated budgets in recent history. The hype was almost like awaiting the release of a high budget blockbuster movie, except a lot more boring.
There was so much talk in the media about this GP co payment of $7 and "the pensioners getting hit hard" but the fact of the matter is these are media hype lines and the major changes are not this at all. How often does a family go to the GP? 10 or 20 times a year? That's $70 or $140 per annum. Not a big deal compared to some of the other changes. I personally haven't been to the GP for at least 2 or 3 years. It's funny that the medicare levy increase to 2% was introduced and legislated by the previous government and no one battered an eyelid. For a family earning $80,000, that is an additional $400 in medicare levy, a lot more than the GP co payment. So, lets have a 'media hype free' look at the actual budget changes that matter.
- The 'Temporary Budget Repair Levy' - This is basically a temporary increase to the top marginal tax rate. Someone earning $200,000 will pay an additional $400 per annum in tax and someone earning $300,000 will pay an additional $2,400 in tax. It is important to note the Fringe Benefit Tax rate is also increasing to reflect the increase in the highest marginal tax rate due to the TBRL and the increase in the medicare levy.
- Abolishing of Dependent Spouse Tax Offset and Mature Age Worker Tax Offset - These are tax offsets available to older Australians who are still working. This could be additional tax of up to $2,971 for some older Australians.
- Removal of the First Home Saver Account scheme - This means those saving for a house now won't be eligible for $1,020 government contribution each year. For those in the scheme, they can withdrawal their balance without restriction from 1 July 2015 so there is no penalty for those who commenced the account.
- Age Pension - The Age Pension Age is being increased to 70 by 2035. This was always inevitable and don't expect there to be no more increases. When the age pension age was first introduced, our life expectancy was younger than the Age Pension Age at the time. So you were lucky to live long enough to claim it. There has been a massive shift in the sense of entitlement. We feel we deserve decades of claiming Age Pension which is hurting the governments budget. Don't cry poor and say my body won't allow me to work that long. The change is 20 years away and it's increased by 3 years. Plan, save, invest and fund your own retirement if you want to retire earlier. Also, it is proposed that the Age Pension rate will be increased in line with CPI rather than the higher rate of a number of other indexation rates. This may result in the Age Pension rate increasing slower than it otherwise would from 2017.
- Abolishing the Seniors Supplement - This is a payment for those who aren't eligible for age pension but hold a Commonwealth Seniors Health Card. This removal means couples who are eligible will now not receive the $1,320.80 per annum ($876.20 for a single).
- Deeming rates - For most income assessment for government benefits, they apply deeming rates for financial investments, rather than assess the income those investments actually earn. The thresholds for deeming rates will be decreasing which means the deemed income will increase, reducing any benefit for those on the income test where the deeming rates apply. This together with the previously legislated change to the income assessment of superannuation pensions from 1 January 2015 will likely make a big difference. It will be very important for people who will be in this position to commence pensions before 1 January 2015 as existing pensions are grandfathered.
- Family Tax Benefit Changes - There is multiple changes here and I won't go through them all but as I can see they are all reductions, removal of indexation, no increase threshold for additional children, reduction of supplement, reduction of income thresholds. For some families with circumstances that spread across many of these changes, this could result in a reduction of Family Tax Benefit of many thousand's of $.
So as you can see, there is plenty of cuts to welfare and tax offsets and also increased taxes. Some of these are significant depending on your circumstances. So if you want to complain about the budget, there is plenty there to complain about. Just don't complain about the minor media hyped changes such as a GP co payment when in reality it is a small cost compared to the other changes.
This isn't all the changes either, there was also changes in other areas such as Disability Support Pension, Newstart Allowance, HECS, Medicare Levy Surcharge and Private Health Insurance Rebates etc.
If you have any questions on how this may impact you specifically or would like details on some of the other changes I haven't talked about, please call me on 1300 200 012 or email on glenn@precisionwm.com.au
