Interestingly, in a positive for equity markets, much of the impact of the cuts is not expected to be felt for a few years. Net savings measures in 2014/2015 are projected to be $1.7bn, increasing to $5.9bn (0.4% of GDP) in 2015/2016 and $10.4bn (0.6% of GDP) in 2016/2017.
This seems to be an acknowledgement that the economy is in the initial stages of a recovery that requires some more time to gain momentum.
The main policy initiatives that may be relevant to you include:
- Temporary Budget Repair Levy of 2% for 3 years from 1 July 2014 on incomes over $180,000
- Medicare Levy thresholds increased for 2013/2014
- Several tax offsets to be abolished
- Age Pension increases to 67 in 2023 and 70 in 2035
- Age Pension to be indexed to CPI rather than wages
- Family Tax Benefit (FTB) freeze on rates and tighter eligibility for FTB B
- $7 co-payment for 70% of existing services (i.e. GP, pathology, imaging)
- Ability to withdraw excess non-concessional contributions without incurring a penalty. Currently excess contributions are taxed at 46.5%
- Superannuation guarantee rate will rise to 9.5% on 1 July 2014 where it will remain until 2018, and then increase 0.5% each year until it reaches 12%
- Fuel excise indexation to be reintroduced from 1 August 2014
The following summary of key budget announcements was prepared by Westpac