Federal Budget May 2014

Federal Budget May 2014

Written by James Weir

James specialises in the theory and best practice of portfolio construction and management. His success within national and international investment banks led him to become a Co-Founder of Steward Wealth and he is a regular columnist for the Australian Financial Review.
May 15, 2014
Overall the federal budget contained few surprises given many of the revenue changes had been announced by the government over the past few weeks.

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:

Personal Taxation

  • 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

Pensions

  • Age Pension increases to 67 in 2023 and 70 in 2035
  • Age Pension to be indexed to CPI rather than wages

Welfare

  • Family Tax Benefit (FTB) freeze on rates and tighter eligibility for FTB B

Medicare

  • $7 co-payment for 70% of existing services (i.e. GP, pathology, imaging)

Superannuation

  • 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%

Other Changes

  • Fuel excise indexation to be reintroduced from 1 August 2014

The following summary of key budget announcements was prepared by Westpac

budget1

This article reflects the views of the author and not necessarily the views of Steward Wealth.

This information is of a general nature only and nothing on this site should be taken as personal financial or investment advice, or a recommendation to buy or sell a particular product. You should seek advice from Steward Wealth who can consider if the general advice is right for you.

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