Superannuation

Taxation of superannuation

Several changes have already been announced to the taxation of superannuation. Under the change, from July 1, 2013, individual superannuation accounts in their pension phase that have more than $100,000 annual earnings will be taxed at 15% on their earnings above that amount instead of being tax-free. The change applies only to earnings and does not apply to pension payments.

Also announced as part of the superannuation changes:

• pension deeming rules (which deem minimum rates of interest) will be applied to superannuation account-based income streams. All products held by pensioners before January 1, 2015 will be grandfathered indefinitely and continue to be assessed under the existing rules for the life of the product “unless they choose to change products”
• deferred lifetime annuities will receive the same concessional tax treatment that superannuation assets supporting income streams receive. This reform will apply from July 1, 2014.

Not previously announced however are some “minor” amendments including:

• a technical amendment to the Low-Income Superannuation Contribution – which provides up to $500 for people earning less than $37,000 to compensate them for tax paid on super – means it will now be paid to individuals with an entitlement below $20
• additional funds have been allocated to compensate members of the APRA-regulated super funds that suffered losses due to the Trio Capital debacle. These funds will be recovered through levies on these super funds.

Concessional contribution caps

Concessional contribution caps for people aged over 60 will increase from $25,000 to $35,000 from July 1, 2013. The higher limit will also be made available to those aged 50 and over from July 1, 2014, and all other super contributors from July 1, 2018. The government had previously said it would increase the cap to $50,000, however this is no longer on the table.

Council of Superannuation Custodians

The government will establish a Council of Superannuation Custodians to advise whether future changes in super rules are consistent with a proposed Charter of Superannuation Adequacy and Sustainability.

Health

Net Medical Expenses Tax Offset phased out

The government will phase out the Net Medical Expenses Tax Offset (NMETO) with transitional arrangements for those currently claiming the offset.

The NMETO will continue to be available for taxpayers for out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until July 1, 2019 when DisabilityCare Australia is fully operational and aged care reforms have been in place for several years.

This measure is estimated to provide savings to the budget of nearly $1 billion over four years.

From July 1, 2013 those taxpayers who claimed the NMETO for the 2012-13 income year will continue to be eligible for the NMETO for the 2013-14 income year if they have eligible out of pocket medical expenses above the relevant thresholds. Similarly, those who claim the NMETO in 2013-14 will continue to be eligible for the NMETO in 2014-15.

Medicare levy low-income threshold

The government will increase the Medicare levy low-income threshold to $20,542 for individuals, $32,279 for pensioners eligible for the Seniors and Pensioners Tax Offset, and $33,693 for families, with the additional family threshold amount for each dependent child or student increasing to $3,094.

This measure is estimated to have a cost to revenue of $38 million over the forward estimates period. These measures apply from July 1, 2012.

Fighting cancer

The budget invested $226 million to help fight cancer. This includes $55.7 million to expand BreastScreen Australia’s target age range for free breast screening by five years – to include women aged 70-74. It is estimated that 145,000 additional women taking up the screenings every two years (from 2016-17) will mean more than 1,100 more breast cancers will be picked up every two years.

It also includes additional funding for screening in both cervical and bowel cancer. Also the government will invest more to prostate cancer research with an $18.5 million package to fund three Prostate Cancer Research Centres across the country to further their critical research work. The budget will also include funding for Cancer Australia to improve the outcomes for people with lung cancer and additional funding for cancer data to better track and record treatment efforts.

The budget also provides further support for critical chemotherapy medicines, and invests $23.8 million for life-saving bone-marrow transplants, funding of $18.2 million to expand CanTeen – a support program for teenagers undergoing treatment for cancer – and $19.5 million to expand the McGrath Breastcare Nurses program.

Increased medical funding

The government will spend an extra $2.2 billion in the Medicare Benefits Schedule across five years and $33.8 million is being invested in the General Practice Rural Incentive program in 2013-14. New medicines in the Pharmaceutical Benefits Scheme will receive $691 million over five years. Drugs will help in the treatment of Parkinson’s, chronic nerve pain and chronic hepatitis C.

Education

Gonski schools funding reforms

Over six years from 2014-15, there will be $9.8 billion invested in school reforms – in an effort to deliver greater equality in school funding, enhanced teacher selection, training, mentoring and more assistance for schools facing disadvantages. This came on the back of the Gonski review which proposed a more equitable and consistent system for school funding.

From January 1, 2014, schools will be funded per student – with primary schools getting

$9,271 per child and high schools getting $12,193 per child. Students with a disability, from a low socio-economic status, non-English speaking or indigenous background, or students from a regional, remote or small school will benefit from the additional funding.

Investment in higher education and early childhood education

Investment in higher education funding is expected to be $51 billion over five years while the government will provide $314.2 million over five years to boost the quality of early childhood education and support workplace reform. The government has also allocated an extra $97 million from 2014 to 2017 for extra Commonwealth-supported places for sub-bachelor and postgraduate courses.

Reforms to work-related self-education expenses

The government will clamp down on work-related self-education expense deductions through an annual $2,000 cap on these expenses from July 1, 2014. Deductible education expenses are costs incurred in undertaking a course of study or other education activity, such as conferences and workshops, and include tuition fees, registration fees, student amenity fees, textbooks, professional and trade journals, travel and accommodation expenses, computer expenses and stationery, where these expenses are incurred in the production of the taxpayer’s current assessable income.

Employers are generally not liable for fringe benefits tax for education and training they provide or fund for their employees, in order to support employers investing in the skills of their workers. This treatment will be retained, unless an employee salary sacrifices to obtain these benefits.

HECS-HELP discount and voluntary HELP repayment bonus discounts to end

From January 1, 2014, the following discounts relating to the Higher Education Loan Program will be removed:

• the 10% discount available to students electing to pay their student contribution up-front, and
• the 5% bonus on voluntary payments made to the ATO of $500 or more.

Establishment of tax studies institute

The government will establish a Tax Studies

Institute (TSI) as a centre for excellence in tax research at the Crawford School of Public Policy at the Australian National University by providing a one-off endowment payment of $3 million in 2012-13.

Disability

Increase in the Medicare Levy to fund DisabilityCare Australia

As announced before the budget, from July 1, 2014, the Medicare levy will increase by 0.5 percentage points. This will raise $20.4 billion between 2014-15 and 2018 19, to be spent on DisabilityCare Australia to provide certainty to Australians with a disability, their families and their carers.

Low-income earners will continue to receive relief from the Medicare levy through the low-income thresholds for singles, families, seniors and pensioners. The current exemptions from the Medicare levy will also remain in place. The revenue raised by the increase in the Medicare levy will be invested in DisabilityCare Australia.

The states and territories will also contribute to DisabilityCare Australia, and will be allocated $9.7 billion over 10 years from the increase in Medicare levy revenue. The money raised will be placed in a special fund for 10 years and only used for the additional costs of DisabilityCare Australia.

The budget provides $19.3 billion over seven years from 2012-13 to roll out DisabilityCare Australia across the country. This brings the government’s total new investment in DisabilityCare Australia to $14.3 billion over the period.

Other measures

Increase in defence funding

The government will provide $585.7 million over four years for the net additional cost of continuing Operation Slipper, Australia’s contribution to international efforts in Afghanistan and the Middle East.

Increased funding towards crime prevention

The government will provide $434.1 million over four years to fund the Royal Commission into Institutional Responses to Child Sexual Abuse. It will also provide $64 million over four years to establish a National Anti-Gang Taskforce

to fight gang-related crime across Australia, and a new Australian Gang Intelligence centre. Further, it will provide $40.9 million over four years towards the establishment of a National Crime Prevention Fund to target street crime and gang violence.

Increase in public broadcasting funding

There will be triennial funding of $90 million to the ABC for news and current affairs, triennial funding of an additional $20 million to SBS, plus a $90 million loan to the ABC to consolidate staff at its Southbank facility in Melbourne.

Foreign aid target deferred

Australia will again delay reaching its foreign aid spending target in the budget which will again be used to fund services for asylum seekers in Australia and offshore, with the amount capped at the same level as last year. The millennium goal, of having the aid budget equal 0.5% of gross national income, which was supposed to be attained in the 2015-16 financial year, has now been pushed out twice and will be budgeted for the 2017-18 financial year. Aid spending will still be increased by around $500 million in 2013-14. The slowing of growth in overseas aid will save $1.9 billion.

Public service cuts

The government confirmed reports that $580 million will be cut from the public service, with the reduction to take place over four years. The cuts will focus on reducing jobs and office space. More than 1,000 public servants will be gone by 2016, and it is expected the cuts will target the middle and senior management. Several agencies such as Foreign Affairs will suffer additional cuts, although Prime Minister and Cabinet will receive a funding increase.

Anzac Centenary Public Fund to be listed as a deductible gift recipient

Part of the Anzac Centenary Program 2014-18, the Anzac Centenary Public Fund is to be listed as a deductible gift recipient (DGR).

Update in the list of specifically listed deductible gift recipients (DGRs)

The following organisations have been approved as DGRs where taxpayers may claim an income tax deduction for certain gifts of money or property:

• Australian Peacekeeping Memorial Project Incorporated
• National Boer War Memorial Association Incorporated
• National Congress of Australia’s First Peoples Limited
• Philanthropy Australia Incorporated
• United Way Australia.

 

 

 

 

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