The 2014-15 Federal Budget is the Government’s blueprint for tackling what they call unsustainable deficits forecast at $29.8bn next year and totalling $60bn over the next 4 years. But the proposals would signal perhaps the most radical reshaping of Australia’s social safety network in its modern history through broad structural reforms to the welfare, healthcare, higher education and pension systems. As individuals and consumers, this will impact all small business owners and operators.
Below are some of the measures of immediate relevance to everyday Australians.
PERSONAL
Debt levy tax
As foreshadowed before the Budget, the Government announced the introduction of a Budget deficit levy (tax), to apply for 3 years commencing on 1 July 2014. It is formally known as the Temporary Budget Repair Levy (we call it ‘work hard get penalised’). The temporary levy will apply at 2% for incomes over $180,000 ie 2% on taxable income in excess of $180,000. Individuals with taxable income of $200,000 will pay 2% of $20,000 ie a levy of $400. Those with taxable income of $300,000 will pay 2% of $120,000 ie $2,400 of levy.
FBT rate increase
The Government said that to prevent high income earners from utilising fringe benefits to avoid the levy, the FBT rate will be increased from 47% to 49% from 1 April 2015 until 31 March 2017 to align with the FBT income year.
FTB Part B threshold
The Government will reduce the Family Tax Benefit Part B (FTB-B) primary earner income limit from $150,000 per annum to $100,000 per annum, from 1 July 2015.
Age Pension age to increase to 70 by 2035
The Budget confirmed the Treasurer’s earlier announcement (see 2014 WTB 19 [668]) that the Government would raise the eligibility age for the Age Pension to 70 by 2035.
The Government announced that, from 1 July 2025, the Age Pension qualifying age will continue to rise by 6 months every 2 years, from the qualifying age of 67 years that will apply by that time, to gradually reach a qualifying age of 70 years by 1 July 2035. People born before 1 July 1958 will not be affected by this measure.
SUPERANNUATION
Superannuation guarantee
Instead of pausing the superannuation guarantee rate at 9.25%, as previously announced, the Government will now increase the SG rate to 9.5% on 1 July 2014 (as currently legislated) and leave it at this level until 30 June 2018. The SG charge percentage will then increase by 0.5% each year until it reaches 12% from 2022-23, a year later than previously proposed. As such, employers are required to increase their superannuation contributions on behalf of employees to 9.5% of ordinary time earnings from 1 July 2014 (as currently legislated).
HEALTH
$7 GP co-payment
A $7 fee for all doctor’s visits will be introduced from July 2015, while at the same time decreasing government subsidies for prescription medications.
Medicare levy thresholds for families increased for 2013-14
From the 2013-14 income year, the Medicare levy low-income thresholds for families will be increased to $34,367 (up from $33,693 for 2012-13). The additional amount of threshold for each dependent child or student will also be increased to $3,156 for 2013-14 (up from $3,094).
EDUCATION
HECS and HELP
The Government will reduce the income threshold for repayment of Higher Education Loan Programme (HELP) debts commencing in 2016-17 and will adjust the indexation of HELP debts from 1 June 2016. The new minimum threshold will be established for the repayment of HELP debts, set at 90% of the minimum threshold that would otherwise have applied in 2016-17. The new minimum threshold is currently estimated to be $50,638 in 2016-17. Further, a new repayment rate of 2% of repayment income will be applied to debtors with incomes above the new minimum threshold.
BUSINESS
Corporate tax rate
A reduction in the corporate tax rate by 1.5 per cent from 1 July 2015. With only one-third of small businesses incorporated, the benefit is limited.
The SME instant asset write-off: businesses still in limbo over $6,500 threshold
The current $6,500 write-off still stands despite the Government’s intention that it be scaled back to $1,000 from 1 January 2014. This places SMEs in something of a quandary. Many will have purchased relevant assets and installed them ready for use before 1 January 2014 to ensure the $6,500 threshold can be utilised. Others may not have done so, or not been able to do so in time. If the mining tax and this associated amendment are passed after 1 July 2014 by the incoming Senate, will the 1 January 2014 application date still apply?
It would have been helpful to business if the Government had made some announcement about these measures however, the Budget papers made no mention of this.
Regulators cut
The Government says it will achieve savings of $142.8m over 3 years from 2015-16 by reducing the ATO’s departmental resourcing. The ATO will bring forward staff reductions that were already planned in response to efficiency dividends and decisions of the former Government. ASIC funding is to be cut as well. All of this means that services to taxpayers and small business people will be impacted.
Ombudsman for access to Commonwealth
The Government will establish the “Small Business and Family Enterprise Ombudsman” to act as a one-stop shop and a single entry point as a means for small business to find out about Government services and programs. For these purposes, the Ombudsman will act as “advocate” and will aim to cut compliance burdens and reduce red-tape. As part of its responsibilities, the Ombudsman will also act as a “concierge” for dispute resolution, a Commonwealth-wide advocate for small businesses and family enterprises, as well as contribute to the development of small business friendly Commonwealth laws and regulations. Consultation is already under way on the proposed legislation.
New Commonwealth contracting arrangements
The Government will establish a unit in the Department of Finance to provide specialist advice on contracts and to ensure small businesses are not disadvantaged as part of Commonwealth Departments’ tendering and procurement processes. The unit will focus on any overly complex processes and any barriers imposed in tendering for Commonwealth Government contracts. The unit will also work with small business to develop procurement guidance tailored specifically for them. If this works efficiently then it will be a good boost for small business.
