This year’s Budget contains many changes that impact all investors directly or indirectly over the next several years.

Here’s a brief summary:

Superannuation

1. Excess non-concessional contributions (excess NCCs)

You will be permitted to withdraw contributions made after June 2013 that are deemed to be excess NCCs and any earnings applicable to those contributions and have them taxed at your marginal tax rate. This new policy will come into effect after the end of the 2013/14 financial year and after you and your super fund have submitted 2013 tax returns and super contribution details.

To enable this to happen, your fund’s trust deed will have to permit the refund of these contributions and their associated earnings. I doubt many deeds will currently allow for this. There’s no specific power for this in the super laws and I don’t think it will be inserted into those laws.

2. Excess contributions and benefit payments above relevant thresholds

From 1 July 2014, those with taxable income of more than $180,000 will pay a 2% levy. This levy will apply to excess contributions. It will apply to excess NCCs that are not withdrawn from your super fund (refer above) and will apply to excess concessional contributions if your taxable income is more than $180,000.

3. Superannuation guarantee

From 1 July 2014, SG rate will increase to 9.5%. This will remain until 2018 and then increases will be by 0.5% each financial year until 12% is reached. The new table is as follows:

4. Contribution limits increased

Due to indexation, the contribution limits will be increased on 1 July 2014. The general concessional cap will increase from $25,000 to $30,000, and the non-concessional cap will increase to $180,000. The Government made no announcement in this year’s Budget about changing this policy.

Centrelink pensions

1. Clean energy supplement

This payment (currently $13.50 for a single person and $21.00 for a couple combined and indexed every six months) won’t be indexed for the 2015, 2016, 2017, 2018 and 2019 financial years.

2. Age pension

• From 1 July 2025, the age pension access age will increase by six months every two years, which means it’ll hit 70 on 1 July 2035:

Those born before 1 July 1958 are not impacted by this change.

• The age pension’s income and asset test thresholds will be frozen for three years from 1 July 2017. That is for the 2018, 2019 and 2020 financial years.
• From 20 September 2017, indexation of the age pension, veteran’s pension, disability support pension and the carer payment will be by CPI, not by higher of Male Total Average Weekly Earnings or Pensioner Cost of Living Index.
• Deeming – from 20 September 2017, the deeming thresholds will be “reset” to $30,000 for singles and $50,000 for couples. The higher deeming interest rate will be applied to these reduced thresholds. There is no announcement on the indexation of these thresholds from the date of this change

Commonwealth Seniors Health Card (CSHC) and Concession Card changes

1. Concessions provided to concession cardholders

The Commonwealth government will cease funding of various pensioner concessions provided by State and Territory Governments:

• Pensioner Concession Card holders currently receive concessions for land tax, water and sewerage rates, electricity, gas and vehicle rego.
• Commonwealth Seniors Health Card & Pensioner Concession Card holders currently receive discounted public transport.

2. Commonwealth Seniors Health Card (CSHC)

There are a number of changes here:

• The income thresholds will be indexed by CPI for 2014, 2015, 2016, 2017 and 2018 financial years.
• Account-based pensions that commence after December 2014 will have an income payment (determined using the deeming rules) under CSHC incomes test. Pensions that commence before January 2015 will be exempt from this test.
• The CSHC supplement (currently $876.20 for singles and $1,320.80 for a couple combined) will be abolished from 20 Sept 2014. However, the CSHC Clean Energy Supplement will remain.

Tax Offsets

1. Dependent Spouse Tax Offset – abolished from 1 July 2014.

2. Mature Age Worker Tax Offset – abolished from 1 July 2014.

3. Private Health Insurance Tax Offset – income thresholds will not be indexed in 2016, 2017 and 2018 financial years.

Company tax rate reduction

From 1 July 2015, the company tax rate will be reduced to 28.5%. Large taxpayer companies will pay a 1.5% levy for the new Paid Parental Leave Scheme bringing their effective tax rate back up to 30%. At this stage, it’s expected the dividend imputation rate will be 28.5% – that is, the Paid Parental Leave Levy will not be a frankable tax payment (because it is a levy not a tax).

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.