Nine months have passed since the May 2014 Federal Budget.
The Coalition Government’s budget reforms are moving slowly ahead, albeit with a number of compromises and modifications.
Many changes are still outstanding while some reforms have been abandoned altogether as they had no chance of getting through the Senate.
Keeping track of these changes and anticipating the next move the Government will make can be a challenge. Below we look at some of the key reforms and their status.
Super Guarantee (SG) rate frozen at 9.5% until 1 July 2021
The Government has pushed out the date from when the SG rate would begin to increase from 9.5% from 1 July 2018 to 1 July 2021.
Starting 1 July 2021 the SG rate will increase by 0.5% each year until it reaches 12% from 1 July 2025.
Mature Age Worker Tax Offset to be abolished from 1 July 2014
A bill has been introduced to abolish the Mature Age Workers Tax Offset starting from financial year 2014/15. This tax offset is for those born before 1 July 1957 (aged 57 and over) and who are earning under $63,000pa.
The maximum $500 offset applies to incomes under $53,000pa and phases out between $53,000pa and $63,000pa.
The Government intends to replace the tax offset with ‘Restart’ – a $10,000 subsidy for employers to employ older workers. This Bill is currently in the Senate for review.
New Account-Based Pensions to be subject to deeming under Centrelink’s income test from 1 January 2015
From 1 January 2015, Account–Based Pensions are subject to deeming under the Centrelink income test for social security purposes.
Currently Account-Based Pensions are treated generously under the income test with income from the actual pension, less a generous deductible amount, being counted as income.
From 1 January 2015, the pension balance of an Account-Based Pension is treated just like any other financial asset and assumed to produce a particular level of income. The pension balance is ‘deemed’ to earn income at a rate of 2%pa on the first $48,000pa for singles and $79,600pa for couples, and 3.5% for amounts over these thresholds.
Existing pensions payable to individuals receiving Centrelink income support on or before 31 December 2015 are ’grandfathered’ from these changes and will continue to be assessed under the current income test rules.
Anyone who thinks they may be affected by the introduction of deeming on income streams should contact their OBT financial adviser in Gatton as soon as possible on 5462 2277.