On Tuesday 13th May 2014 the Federal Budget for the 2014-2015 year was announced
Following is a summary of changes that we feel could affect some of our clients
· Temporary Budget Repair Levy (TBR)
A 2% levy has been announced which will affect clients with a taxable income in excess of $180,000 per annum.
This means a 2% levy will be paid on individuals taxable income in excess of $180,000.
· Mature Age Workers Tax Offset
The Mature Age Workers Tax Offset is abolished from 1 July 2014.
Therefore the last year to received the $500 tax offset will be 2013/2014yr.
· Family Tax Benefit
From 1 July 2015 families will be eligible for the Family Tax Benefit (FTB) part B only:
1. While their youngest child is aged six years or under; and
2. The family's primary earner has an adjusted taxable income of $100,000 or less per year
A new payment will be introduced for single parents who receive the maximum
FTB Part A. For each child between 6 and 12 years they will receive $750 per annum.
· Company Tax Rate
The company income tax rate will be reducing to 28.5% from 1 July 2015.
· Research and Development Tax Offset
The R&D Tax Offset rates are being reduced by 1.5%. Starting 1 July 2014.
· Fringe Benefits Tax Rate
The FBT rate is to be increased in line with the 2% Temporary Budget Repair Levy. From 1 April 2015 the rate will increase from 47% to 49%.
· Superannuation Guarantee
It has been confirmed that superannuation guarantee will be increasing to 9.5% on 1 July 2014. The rate will remain at 9.5% until 30 June 2018.
· Excess non concessional super contributions
From 1 July 2013 if an excess non concessional contribution has been made to a superannuation fund the member will have the option of withdrawing the excess contribution.
Any earnings on the excess contribution would be included in the member's personal tax return and taxed at their marginal tax rate.
Details are yet to be confirmed regarding what period the member would be required to withdraw the contribution to avoid excess contributions tax.
Tax Planning Opportunities
There are a number of tax planning opportunities available following these changes.
· Individuals with a personal taxable income likely to exceed $180,000 could consider bringing forward income where possible into the 2014 tax year before the TBR Levy commences. In addition it would be beneficial to defer any deductions to the 2015 year.
· Individuals with a personal taxable income likely to exceed $180,000 from 1 July 2014 will derive greater benefits of salary sacrifice are greater than ever before. For example salary sacrificing into superannuation will result in a tax saving of 34%.
· Individuals with a personal taxable income likely to exceed $180,000 will benefit from an additional opportunity in relation to salary sacrifice. The TBR Levy commences on 1 July 2014 however the FBT rate does not increase until 1 April 2015. This means that for high income earners it would be beneficial to receive Fringe Benefits and pay Fringe Benefits tax at 47% as opposed to paying Income Tax at 49%.
If you have any questions in relation to the Federal Budget Report or how the budget may affect you personally, please call our office for advice.