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May 15th, 2014
James Weir
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Federal Budget May 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

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