Prime Minister Tony Abbott recently said, “There will be tough decisions in this year's budget as there must be, but there will also be good news.” This Federal Budget is not about what the Government believes is necessary but what they can get through the Senate. Large structural reforms to tighten welfare, education and health have failed in the Senate in their current form.
This budget will be about moving thresholds and imposing restrictions on the existing system. The Budget will be handed down on 12 May 2015 and we will release details on how we see the budget impacting upon our clients.
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The Prime Minister calls the “families package” the centrepiece of the upcoming budget with child care facing “significant changes.”
While the Government has stated that this will be a better deal it is likely to be a reformulation of how child care support applies. If the budget measures follow the Productivity Commission’s recent recommendations the Government will introduce a single means tested and activity based system.
The Minister for Social Services, Scott Morrison also recently released details of an in-home nanny program to support shift workers. The two year trial will support home care for children of shift workers, such as nurses and police, etc.
GST on online purchases and services
To increase GST revenue, the Government has the option of trying to force through a GST rate increase with State and Territory approval or broaden the base. High on the list is applying GST to revenue earned from online and digital businesses.
On 9 April, Treasurer Joe Hockey said, “GST should be charged at the source, so a company providing intangible services into Australia, such as media services or so on, wherever they are located they should charge GST on those services.”
That is, if you are an Australian resident and purchase a good or service then tax should apply in Australia as opposed to where the business is domiciled. This issue is likely to be broader than just the $1,000 threshold for goods purchased from overseas and Netflix but a review of how tax applies to intangibles. It’s a question of when these measures will apply - either in the Budget or as part of the broader tax review.
Contributing to super - what you need to know
Topping up your superannuation just got a little less dangerous with new rules that allow excess non-concessional contributions to be refunded.
Before the change, a huge number of people were penalised by excess concessional contributions tax because they contributed over the allowable level of contributions. It was not uncommon to see $70,000 tax bills from what was a relatively small over contribution. And, there was very little you could do about it even if the contribution was not deliberate.
The new rules mean that members can have the excess contributions refunded to them PLUS 85% of the associated earnings on those amounts. The full earnings will then be included in your assessable income and taxed at your marginal tax rate. You will then be entitled to a non-refundable tax offset equal to 15% of the associated earnings. Simple right? Maybe not but it’s a lot easier to understand than a $70,000 tax bill for going even $1 above your contributions limit.
These new rules apply to excess non-concessional contributions made from the 2013/14 financial year onwards. So, if you were affected by excess contributions tax, something can be done about it.