Key Highlights

•   Personal tax rate changes deferred for at least three years
•   Future increase in Medicare Levy
•   Limited deductibility for self education expenses
•   Confirmation of April superannuation announcements
•   Age pension relief for pensioners considering downsizing their principal residence

Overview

The announcements made on 14 May 2013 were largely non-surprising, with virtually all major announcements from a financial planning perspective having been rumoured and confirmed in the days and weeks leading up to ‘Budget Night’.

Of chief significance, the Government is moving ahead with its proposal to fund the DisabilityCare Australia program (formally known as the National Disability Insurance Scheme) with a 0.5% increase in the Medicare Levy from 1 July 2014.

Personal marginal tax rates and thresholds that were due to increase from 1 July 2015 have been deferred until the carbon price reaches $25.40. By tying the change to the carbon price, there is no guarantee on when the change will occur, although it is currently predicted to occur sometime after 1 July 2018.

Whilst the Government is looking to improve education funding generally through implementing many reforms from the Gonski report, a lot of people may actually find that the personal cost of education will increase. The Government has announced that from 1 July 2014, an annual limit of $2,000 will apply to the deductibility of work-related self-education expenses and from 1 January 2014 the current discounts that apply to voluntary or up-front HELP payments will be removed.

For aged pensioners that have previously considered downsizing their principal residence, the Government has announced a trial of a new scheme that allows for some of the proceeds from the sale of a principal residence to be invested in a special account and for that amount (and any earnings on it) to be exempt from Centrelink means testing for a period of 10 years.

Finally, one potential positive from this year‟s Budget – and seemingly inconsistent with previous years – is that there were no further significant changes announced to Australia‟s superannuation system. Of course, that may be because they were previously announced on 5 April this year and there was nothing more to be done. Please refer to our previously published article here for the full details of those changes.
If you have any questions about the 2013/14 Budget and its impact on strategies you are employing or considering, please contact us to discuss further.