The good news is that this is a more positive Budget than the “tough” budget of last year. Our four key focus areas here are: no new taxes on superannuation, generous tax cuts for small business, significant changes to the age pension assets test and childcare boosts.
1. Superannuation saved
We are relieved to see that the Government has not meddled with superannuation arrangements. This is critical, we believe, for confidence in the superannuation system.
2. Tax cuts for small business
The centrepiece for this year’s budget is the $5.5 billion package designed to stimulate small business. From 1 July 2015, small companies with annual turnover of less than $2 million will have their tax lowered from 30% to 28.5%. Sole traders, partnerships and other unincorporated businesses will get a 5% tax discount cutting out at $1,000.
Additionally, small businesses will also be able to immediately deduct new assets up to $20,000, an increase of $19,000 on the current limit. This includes cars, home office equipment and electronic equipment such as phones and laptops. The change applies from budget night 2015 (12 May 2015) to 30 June 2017 and will cost the government around $1.75 billion.
Other small business initiatives include abolishing fringe benefits tax on all portable electronic devices used for work and expanding tax concessions for employee share schemes.
3. Age pension changes
There are significant proposed changes to the aged pension assets test to commence from 1 January 2017. This will enhance the pension for people with lower asset levels, and decrease pension benefits for those with greater asset values.
Under the proposed changes, the value of assets you can have (excluding the family home) to qualify for the full pension will increase significantly – by $48,000 for a single homeowner to $250,000; and by $88,500 to $375,000 for a homeowner couple. However, once assets are above this threshold, the taper rate will double – which means that individuals with more assets will receive less pension or stop having access to the pension. The asset level at which the part pension cuts out will reduce for a single homeowner from $775,000 to $547,000; and for a homeowner couple, it will reduce from $1,151,000 to $830,000.
As a sweetener to those who will lose their pension, the government will guarantee eligibility for the Commonwealth Seniors Health Card (CSHC), which provides the same concessional access to pharmaceuticals as those on the pension.
4. Childcare boost
Most families will receive more help with childcare costs under budget measures designed to encourage parents to do more paid work. The changes offset cuts to Family Benefits Part B announced in last year’s budget. The key element of the package is a new Child Care Subsidy to take effect from 1 July 2017 replacing the current Child Care Rebate, Child Care Benefit and the Jobs, Education and Training Child Care Fee Assistance.
The subsidy will taper from 85% per child of the actual fee or the benchmark price, whichever is lower for family incomes of up to $65,000, down to 50% of the fee for families earning up to approximately $170,000 or more. A cap on subsidies of $10,000 per child is to apply for families with income of $185,000 and above. This is more generous than the cap of $7,500 regardless of income that currently applies under the existing Child Care Rebate.
This new Child Care Subsidy will be means and activity tested, paid directly to the family’s choice of approved service for up to 100 hours per fortnight and based on benchmark prices for a variety of child care services. Any difference between the subsidised amount of the benchmark price and the actual price charged by the service would be met by parents. The hourly benchmark prices at the time of introduction will be $11.55 for Long Day Care, $10.70 for Family Day Care, $10.10 for Out of School Hours Care and $7.00 for In Home Care Nannies services.
Source: Asgard Federal Budget Update 13 May 2015