2014/15 Federal Budget Highlights

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The Federal Treasurer, Mr Joe Hockey, handed down his first budget at 7:30 pm (AEST) on 13 May 2014. In a budget intended to reduce the deficit from its current $49.9b to $29.8b next year, he said that he was “delivering balanced and credible budget repair”. The budget contained few tax and superannuation measures but included a range of austerity measures, especially in relation to social security and health.

Here are the tax, superannuation, social security and health highlights.

Individuals and families

A three year temporary levy of 2% will be imposed on individuals’ taxable income in excess of $180,000 pa, from 1 July 2014 until 30 June 2017.
The dependent spouse tax offset (DSTO) will be abolished for all taxpayers from 1 July 2014.
The mature age worker tax offset will be abolished from 1 July 2014.
The Medicare levy low-income threshold for families will be increased from the 2013/14 income year.
The First Home Saver Accounts scheme will be abolished from 1 July 2015.
From 1 July 2014, taxpayers will receive a tax receipt showing how and where their tax dollars were used.
The income threshold at which students commence repayment of their Higher Education Loan Programme (HELP) debts will be reduced with effect from 1 July 2016. In addition, HELP debts will be indexed at a rate equivalent to the yield on 10-year government bonds (up to a 6% maximum) instead of CPI from 1 June 2016. Loan fees for undergraduate FEE-HELP and VET FEE-HELP will be abolished.
Various reforms will be introduced to the pension system including increasing the qualifying age for the Age Pension to 70 by 1 July 2035.
The eligibility age for the Newstart Allowance and Sickness Allowance will increase from 22 to 24 years from 1 January 2015.
Various reforms to the Family Tax Benefit (FTB) Part A and Part B payments will be introduced, including reducing the FTB Part B primary earner income limit to $100,000 pa and changing certain eligibility requirements. A new $750 allowance will be introduced for single parents on the maximum FTB Part A rate, but who will no longer receive FTB Part B payments due to eligibility changes. These measures largely commence on 1 July 2015, with some transitional arrangements.
Changes will be made to the Medicare system relating to patient contributions, indexation of fees and thresholds, and Medicare safety net arrangements.
Two organisations have been added to the list of specifically listed deductible gift recipients.
Round 5 of the National Rental Affordability Scheme (NRAS) will not proceed.

Companies, finance and not-for-profits

The start date of the new system for managed investment trusts (MITs) will be deferred by 12 months to 1 July 2015.
The rates of the refundable and non-refundable offsets for the R&D Tax Incentive will be reduced by 1.5 percentage points.
The consolidation integrity package announced in the 2013/14 Budget will be modified.
The measure addressing inconsistencies in the tax treatment multiple-entry consolidated (MEC) groups will not proceed.
The measure announced in the 2013/14 Budget to amend the principal asset test in the foreign resident CGT regime will be modified.
No decision has yet been made on a proposed targeted anti-avoidance provision to address certain conduit arrangements.
Alternatives to the previous government's better targeting of not-for-profit tax concession measures are not required at this time.
The seafarer tax offset will be abolished from 1 July 2015.

Superannuation

Individuals will be given the option of withdrawing superannuation contributions in excess of the non-concessional contributions cap made from 1 July 2013 and any associated earnings, with these earnings to be taxed at the individual’s marginal tax rate.
The schedule for increasing the superannuation guarantee rate to 12% will be changed.

Tax administration

The tax and superannuation laws will be amended to correct technical defects, remove anomalies and address unintended outcomes.
The start date of the legislative elements of the measure to improve tax compliance through third party reporting and data matching will be deferred to 1 July 2016.
The Commonwealth Ombudsman's case management of tax complaints will be transferred to the Inspector-General of Taxation.
A number of government bodies will be abolished or merged, resulting in a reduction of 36 bodies.
The planned reduction in 1,600 ATO staff that was due to occur in 2015/16 will be brought forward to achieve savings of $142.8m over three years.

Fuel, oil and mining

The income tax treatment of realignments of interests between joint venture partners in the minerals and petroleum industry will be clarified for changes of ownership within a common project.
The Product Stewardship for Oil scheme levy will be increased to a rate of 8.5 cents per litre of oil, or kilogram of grease, from 1 July 2014.
Changes to the tax treatment of biodiesel commence from 1 July 2015.

Response to the National Commission of Audit Report

The government has outlined its response to the National Commission of Audit Report.

Download a full copy of the 2014/15 Federal Budget Highlights

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